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Health & happiness: 10 wealth managers go on a spring clean

Wealth managers reveal how they have freshened up their portfolios this spring.

Dan Cartridge

Assistant fund manager, Hawksmoor Fund Managers, Exeter

Frontiers freshen-up 

‘While December 2018 was the worst month for investors in equities since the Great Depression, the subsequent rebound in financial markets has been the strongest since 1987.

'The effect of this is that valuations of mainstream equity and bond markets appear very rich in aggregate. Therefore, we haven’t been making wholesale changes across our three funds.

‘However, value can still be found by looking beyond headline indices. In our Global Opportunities fund for instance, we recently introduced a position in BlackRock Frontiers Investment Trust.

'Frontier markets have been left behind over the past 18 months as country-specific issues in Argentina and Turkey have weighed on broad investor sentiment with fears over contagion risk.

'However, frontier markets are heterogeneous, and negative investor sentiment provides excellent opportunities for active stock pickers to deliver attractive long term returns for those willing to look through the short-term volatility.’ 

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Dan Cartridge

Assistant fund manager, Hawksmoor Fund Managers, Exeter

Frontiers freshen-up 

‘While December 2018 was the worst month for investors in equities since the Great Depression, the subsequent rebound in financial markets has been the strongest since 1987.

'The effect of this is that valuations of mainstream equity and bond markets appear very rich in aggregate. Therefore, we haven’t been making wholesale changes across our three funds.

‘However, value can still be found by looking beyond headline indices. In our Global Opportunities fund for instance, we recently introduced a position in BlackRock Frontiers Investment Trust.

'Frontier markets have been left behind over the past 18 months as country-specific issues in Argentina and Turkey have weighed on broad investor sentiment with fears over contagion risk.

'However, frontier markets are heterogeneous, and negative investor sentiment provides excellent opportunities for active stock pickers to deliver attractive long term returns for those willing to look through the short-term volatility.’ 

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Angus Coupland

Portfolio manager of the Coupland Cardiff Asia Alpha fund, London

A healthy and happy interior makeover 

'The only movement of note in the portfolio of late was our taking profit in Suofeiya (a custom home interior designer), which had gained nearly 50% since we purchased it early 2019.

'We reinvested the proceeds in Health and Happiness. H&H is a name that has seen a huge turnaround in fortunes in recent years. Initially, the company was only focused on baby nutrition, primarily as a producer in the very competitive infant milk formula segment. While undergoing a restructuring of this business, the company made the bold move to acquire Swisse Wellness, Australia’s number one vitamin brand.

'At this time, it was a highly geared company, but over the past several years, thanks primarily to the appointment of an excellent CFO, the company is now dominant in the Chinese online wellness space and registering growth rates in their adult nutrition business of well over 20%.

'We expect China’s burgeoning middle class will continue to increase their spending on wellness products, particularly those with excellent offshore credentials.'

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Simon Nicholas

Senior fund manager, Brown Shipley, Manchester

Springing into action 

‘Well, not so much a spring clean as a “spring into action”. With the ever-changing Brexit status, we think the risks of the worst case “no-deal” scenario have diminished somewhat.

'Having drastically reduced our UK small cap exposure at the beginning of October last year, we re-established a full weighting in the first couple of weeks of March across our multi-asset fund range.

‘UK mid cap might be the more obvious UK domestic play, but this segment of the market was already up with events. Small cap on the other hand, while still having more than 60% domestic exposure (through the vehicle we use), appeared to have lagged the broader market, therefore presenting a better opportunity.

‘The other significant change we’ve made has been to add some emerging market debt exposure. We’ve utilised a more conservative product focusing on the yield opportunity here, while aiming to minimise some of the other risks inherent in this exposure.’

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James Horniman

Partner and portfolio manager, James Hambro & Partners, London

Dirty dollar 

‘Our portfolios benefited from being underweight the UK and overweight dollar assets last year. However, the currency pendulum may be about to swing. It is possible that sterling could bounce back on a satisfactory Brexit, but to call a sterling bounce now feels like a heads or tails gamble.

'We are more confident saying that the dollar is facing downward pressure and now is probably a good time to begin unwinding some of our greenback exposure. But where to put the cash?

‘We have sold down our US Treasuries and bought some UK index-linked gilts, but have spent the majority on emerging markets and Asia – parts of the world that might be expected to benefit from a weaker dollar.

‘We are not selling in May and instead have been putting money back into equity markets on the back of a widely-held sense that they are heading in a positive direction and still represent fair value.’

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Daniel Bland

Investment manager, EQ Investors, London

A sustainable scour   

'The UK equity market is a good place to start a spring clean, dominated by particularly old businesses. Despite only 28 of the original 100 companies remaining in the FTSE 100, the Anglo-Persian Oil Company of 1909 still features alongside the likes of BAT, a 1902 joint venture.

'These businesses have products that are not sustainable, considering people’s wellbeing or the threat of climate change, and their business models are under threat.

'We’ve bought Investec UK Sustainability, managed by Matt Evans. His strategy identifies businesses internal and external sustainability, that’s both the quality of ESG criteria and sustainability of the businesses core model. Matt sits within the quality team at Investec and draws on their considerable resource and combined experience.

'We’re excited by the prospects of businesses that provide solutions to environmental and social issues, not those exasperating them. The later will only attract greater levels of scrutiny of their external environmental and social costs.'

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Dan Boardman-Weston

Chief investment officer, BRI Wealth Management, Meriden

Tech rinse 

'During the last few months of 2018, we maintained and even increased our equity weightings despite the sharp falls seen in global markets. This decision "not to panic" has served our clients well, and we are enjoying the sharp recovery in markets so far this year.

'However, with the US stock market rallying so strongly, we are taking the opportunity to change the composition of our North American basket slightly. We are looking at reducing our weightings in our higher beta and technology driven US funds to redeploy proceeds into more defensive and less volatile funds still within the US. 

'Additionally, we have recently increased our exposure to UK warehouses, which is still an attractive area of the market. We expect to see strong pricing – since supply of last mile e-commerce warehouses remains thin – while picking up a 6% yield in the process.'

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Jeroen Bos

Portfolio manager of the Church House Deep Value Investment fund, London

Hydrogen wash   

'We sold our position in Nippon Antenna, our Japanese holding, which had appreciated strongly in price, leaving it very vulnerable to any kind of setback. And so it proved, the timing was uncanny – as soon as we had sold the shares,  within a day or two, the price started to retrace the majority of the advance.

'We also sold a small part of our holding in Hydrogen Group, mainly as a result of the strong share price appreciation over the past few weeks, on the back of the very positive updates released by the company.

'On the back of these statements, the momentum should continue to push the share price higher, however, we had to sell some as the position reached the upper permissible limits.

'We made no further sales in the portfolio but continued to benefit from the renewed interest in smaller value stocks.'

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Adam Ross

Investment director, Canaccord Genuity Wealth Management, London

Deadwood clearout 

'As bluebells fill the woods, baby lambs frolic in fields and that "emptying cupboards" feeling takes hold, in investing, we have a similar attitude to portfolios. What can we do to hone performance and offload dead wood?

'We have used the strong rally since the start of the year to take some profits on our overweight US equity position. We have recycled this into our UK equity position where we have been underweight, as valuations start to look more attractive and we are likely to get a (blissful but brief) Brexit hiatus.

'As the macro outlook in Europe remains difficult, we have removed our European equity exposure. And we continue to focus on bringing down the cost of our underlying investments, by adding further ETF exposure to portfolios.

'In our tailored portfolios, we have added more structured product exposure, which allows us to participate in any continuation of the equity rally, while also providing downside protection in the event of a sell-off, like the one that we experienced in Q4 2018.'

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Edward Playne

Branch manager, Charles Stanley, Bath

Water waste

‘As we enter the new tax year, the top priority is to use this year’s ISA and CGT allowances where applicable. I have taken profits on water utility stocks, which have rallied strongly so far this year. The shares have performed well over the last 10 years as investors sought reliable income in the face of falling bond yields.

‘The sector now faces three main pressures: bond yields are not expected to fall much further; there is heightened political risk after Labour indicated their intention to renationalise water companies; and, in the current pricing review, Ofwat are expected to reduce returns to shareholders. I therefore do not expect the same level of dividend growth in the sector. 

‘For reliable cash flows, I prefer other sectors such as infrastructure and renewable energy.’

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Charles Newsome

Divisional director, Investec Wealth & Invest, London

Spring scrub 

'One of the biggest mistakes any investor can make with their portfolio is failing to adequately review it, especially dealing with the underperformers.

'The first spring cleaning job must be to review the underperforming stocks and re-evaluate their investment theses. Second, investors should assess the large positions and right-size them to reflect risk appetite. The bigger the individual investments, the bigger the risks.

'What investors should avoid at all costs is selling their winners to add to their losers. If they have the technical skills, analyse each company’s competitive position to ensure they remain price givers.

'Portfolios must have a sensible number of holdings. It has been proven that over the longer term, portfolios with a fewer number of stocks tend to outperform ones with a larger number despite being more volatile. It’s easy to build a portfolio with too many holdings so streamlining it can deliver a better risk-adjusted outcome.'

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