Fancy has turned to fear for James Burns, who runs the £200m managed portfolio service at Smith and Williamson, as a strong FTSE 100 in the last 12 months has prompted him to cut his large cap UK equity exposure.
Mr Burns said he has sold out of the iShares FTSE 100 tracker that had been a long-standing holdings in the funds, and invested the cash into the £1bn Miton UK Multi Cap Income fund, managed by Gervais Williams.
Mr Burns said: “Last year we changed very few of the holdings, the market performed very well and the UK equity exposure we had worked very well.
"The overseas earning companies in the FTSE 100 performed very well last year, and we thought maybe for this year, it’s time to take a little cash out of that area.”
The Miton Multi Cap Income fund has some FTSE 100 exposure, but Mr Williams reputation is built on his success as a smaller companies fund manager.
Mr Burns said a general theme of the changes he is making to the managed portfolio service is a shift towards cheaper parts of the market, and to funds with more of a focus on value than growth assets.
This has prompted him to reduce his investment in the £795m Baillie Gifford Japan investment trust, and switch to the £2.3bn Man GLG Japan Core Alpha fund and the £691m JP Morgan Japan investment trust.
He noted the Baillie Gifford trust recently announced that the manager who has guided it to stellar performance in recent years, Sarah Whitley, is to retire in April. The trust trades at a premium to net assets.
Mr Burns said the GLG fund has more of a focus on value stocks and small and mid cap companies.
An investment he has made recently that he believes will not be held in any other managed portfolio service such is its niche nature is the Sequoia Infrastructure fund. He said this is invested in North American infrastructure assets and “is a diversifier away from all of the worries in the world in equity and bond markets, and politics".
"It isn’t really correlated to any of those.”
Mr Burns said the final way he is trying to protect his clients from the risks of a market downturn is “by investing in the cheapest market.”
This has prompted him to shift capital away from one of the emerging markets that has risen fastest, Indian equities, and into Russian equities, which he said are the cheapest market.
David Absolon, investment director at wealth management firm Heartwood said he has been moving into micro-cap equities, and alternative assets such as hedge funds due to the correlation both of those asset classes have to wider equity and bond markets.
The investment manager added that the equity exposure he does have is focused on Europe, and Japan, as he sees those markets as representing the best value in equities right now.
David.Thorpe@ft.com
