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Rathbone takes its highest weightings in alternatives

Rathbone Unit Trust Management’s multi-asset portfolios have their highest weightings in alternative investment strategies since launch in 2007.

The Rathbone total return portfolio has 40 per cent invested in alternatives while the Rathbone strategic growth portfolio has 30 per cent. The multi-asset team says markets are becoming increasingly volatile but this is not the reason for its use of alternatives. It is more concerned about correlation between asset classes than the market volatility that creates investment opportunities.

RUTM says that among the traditional assets of equities, bonds and property, equities look better value. It says traditional multi-asset portfolios used government bonds to reduce overall volatility but holding gilts is now likely to increase volatility in a portfolio. The firm says the market is fixated on lowolatility absolute return funds but these do not help multi-asset funds if highly correlated to equities.

Instead, RUTM’s multi-asset team is looking only at alternative investment funds that have a low correlation to equity markets. One example isBlueCrest’s bluetrend fund, a trend-following fund with the ability to make money in rising or falling markets.

RUTM head of multi-asset investments David Coombs says bluetrend’s volatility is close to equities but is held for its low correlation to equities.

He says: “You can have two funds – an equity fund with 16 per cent volatility and an alternatives fund with 20 per cent. The alternatives fund has higher volatility than the equity fund but if blended together in a portfolio, you can reduce your overall volatility to below 16 per cent.”

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