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Cazenove looks at the bigger picture

Cazenove’s multi-manager team have repositioned the funds of funds they inherited last October towards a more defensive stance.

Managers Marcus Brookes and Robin McDonald felt that although the UK growth fund held high quality funds, a number of these had significant exposure to small and mid-caps which meant they were positioned for an optimistic view of the stockmarket.

This did not sit well with the team’s more cautious views and a preference for lower-risk bigger companies resulted in a higher than normal level of turnover in the portfolio, with 11 funds sold and four funds added.

Brookes says the replacement funds were those that he and McDonald expect to provide good relative returns and this decision seems to have been proved right, as the UK growth fund has relatively outperformed.

The multi-managers are also taking into account Cazenove’s research into the business cycle, which indicates that there is a strong chance that earnings have peaked at this stage. They have reduced exposure to banks because although stocks are cheap, the team do not know how much more bad news is to come.

Brookes says the higher profile multi-manager diversity fund has seen asset growth of £10m-£15m and is in the top decile. He says the fund’s appeal lies in its rigid strategic asset allocation, with the portfolio divided equally between fixed interest/cash, equities and alternative assets. This means the fund remains diverse at all times, avoiding the potential problem of distorting the multi-asset balance by allocating too much to the best performing sectors.

Brookes says: “If one asset class goes up, some fund managers tend to like it more and add to it. However, because it is doing well already, it becomes a bigger part of the portfolio. A rigid strategic asset allocation means the focus is to have all asset classes at all times. We are also diverse in each area, for example, alternatives include property and hedge funds, which are not linked.

“Advisers need to be looking at their clients’ portfolios because we have had a five-year bull market and they may have deviated from the original asset allocation.”

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