Tom Becket, chief investment officer at Psigma Investment Management discusses the core themes powering Psigma’s portfolios.
'The investment process we have built at Psigma over the last 15 years has been created around global multi-asset, multi-manager investment strategies. While this has become the norm for the wealth-management industry following the Great Financial Crisis and the adoption of a whole host of regulations in the ensuing years, when we started this approach, it was still relatively rare. The industry was still heavily focused on the domestic UK asset markets, with a major bias towards individual securities.
Our decision when we started the business was to adopt a process that was used in the institutional industry and at some of the successful US endowment funds. Our aim was to manage an institutional investment process for private retail clients and this philosophy has formed the core of our investment principles.
To make understanding a complicated investment world easier for our clients, we have built our portfolios around themes that our investors can easily understand. We believe that this both helps their experience and tries to ensure that there are no nasty surprises; clients hopefully know what is happening in their portfolios at all times and why.
The current major themes underpinning our clients’ investment strategies are defence, inflation protection, hunt for yield, long-term equity and emerging market growth. Though the weightings towards these core themes have shifted frequently over the last decade, the core principles of each theme have remained constant.
Given high valuations and rising correlations between bonds and equities, this is arguably our most challenging theme to populate currently.
A key position, therefore, is the Odey Odyssey fund, which is positioned negatively towards all assets and acts as a hedge in our portfolios.
This fund helped our outperformance over our peer group in the first quarter, when most major asset markets struggled.
This is a vital theme of our portfolios at all times, given the long-term inflation-plus targets that we use with our investment strategies. Currently, a key position in our portfolios is the Fidelity Global Inflation-Linked Bond fund. We admire the short duration focus and the efficiency of the inflation break-evens that the fund is invested in.
A major issue for all investors over the last few years, due to the distortive effects of global quantitative easing, has been sourcing attractive levels of income in global bond markets. To that end, we have eschewed the dubious virtues of big bond funds and created specific mandates for our clients with global credit managers to ensure that we can achieve our clients’ desire for income, while avoiding the pitfalls of liquidity issues and the overly-diversified nature of big bond funds.
We have worked with TwentyFour Asset Management and Semper Capital Management in specific mandates in short duration credit, specialist US high yield credit, European asset-backed securities and US residential mortgage-backed securities. This segregated mandate approach is efficient from an investment and cost perspective, and is a key USP of our process at Psigma.
The growth elements of our portfolios are within the long-term equity and emerging market growth themes. At Psigma, we like to take large long-term contrarian positions, which have majorly contributed to our strong performance.
Current key positions are in Polar Capital Healthcare Blue Chip which helps us to achieve exposure to a favoured sector, and RWC Nissay Japan Focus fund to provide exposure another favoured theme of Japanese corporate change. We also like the theme of Asian consumption, with Macquarie Asian All-Stars a key holding.
At all times our strategy is broadly a diversified mix of conviction themes, blended to help us achieve our client long-term aims and we expect this approach to continue to be successful in the uncertain future.'