The company thinks that investing in defensively positioned funds that contain higher quality companies provides an appropriate foundation on which to build portfolios while the economy recovers. Invesco Perpetual income, Brown Advisory US equity value and Henderson Asian values are examples of the multi-managers more defensive holdings.
The team believes changes in monetary policy will not de-rail the recovery, but expects it to slow down cyclical parts of the market, especially those that have no particular investment story apart from economic recovery.
At the other end of the barbell, the team will invest selectively in funds that are a bit more cyclical. There will need to be clear reasons for performance to continue into 2010 and some funds may invest in areas that were unfairly treated last year.
Henderson New Star head of equities Bill McQuaker says Japan is a cyclical market that typically performs well when the global economy is up, but did not follow the pattern last year due to the election and a stronger than anticipated yen. He says the region has a lot of catching up to do this year, along with cyclical parts of the UK market such as aerospace. McQuaker says this sector did not pay handsomely last year, but he expects 2010 to be better and is holding Henderson’s UK equity income fund to gain exposure to aerospace and other cyclical industries.
At the more aggressive end of the cyclical market, McQuaker has some technology exposure as he feels that it is another sector that is likely to have a good year.
McQuaker says: “We are also looking for opportunities to counter trade around our core strategies. When elements perform strongly, we will take them off the table to recycle in to areas that have not done too well. We think this is the right way for trading in 2010.”