Fidelity International has taken a more defensive stance in its multi-manager balanced portfolio, with manager Steve Gibson reducing exposure to risky assets such as equities, commodities and property.
Gibson says the global economy is moving into a period of slow growth. He thinks this is a mid-cycle slowdown triggered by high energy and commodity prices, plus the impact the Japanese earthquake and tsunami have had on the global economy. He expects an improvement later in the year.
The slowdown has prompted Gibson to increase fixed income slightly, although exposure is still underweight.
He expects government bond exposure to work well when growth is slowing and thinks short duration high-yield bonds will perform well until interest rates rise. Local currency emerging market debt is another area Gibson likes because he expects local currencies to appreciate as these regions need to control inflation.
He constructs his portfolio around long-term holdings, which he rotates in response to changing economic conditions. This means reducing exposure to some funds to increase weightings elsewhere in the portfolio rather than constantly selling funds in order to replace them.
One new fund Gibson has introduced is the RWC income opportunities fund.
He says: “RWC income opportunities is run by the old Schroder income team. The fund is of their own design and allows them to get around the constraints they had at Schroders.
“It is a good fund to hold for the long term but it is particularly good in the current environment.”