Evelyn Partners has switched UK equity funds in several model portfolios, removing Ninety One UK Alpha and installing Fidelity Special Situations instead. The latter has greater exposure to mid- and small-caps, which Evelyn Partners believes are more attractively valued than large-caps.
Lead portfolio manager James Burns said: “We are seeing increased merger and acquisition activity as both companies and private equity seek to take advantage of the historic cheapness of the UK market. With its greater allocation to companies outside of the FTSE 100, we believe the Fidelity fund is well positioned to benefit from this trend.
“Its manager, Alex Wright, has an outstanding long-term track record by taking an often contrarian stance and investing where he sees value in the UK.”
Performance of funds vs benchmark and sector over 3yrs
Source: FE Analytics
Alongside Fidelity Special Situations, Evelyn Partners holds Lindsell Train UK Equity and the L&G UK 100 Index Trust in most of its model portfolios.
Its Core Income & Growth portfolio has a different line-up however and uses Martin Currie UK Equity Income, Premier Miton UK Multi Cap Income, Redwheel UK Equity Income and L&G UK 100 Index Trust for UK equities.
In its latest portfolio rebalance, Evelyn Partners increased its allocation to US stocks at the expense of UK and European equities. Donald Trump’s resounding election victory gave a strong mandate to the US Republican party, whose policies Burns expects to “support US economic and market supremacy at the expense of the rest of the world”.
This move was executed using incumbent funds. The Core Conservative, Cautious and Balanced model portfolios all have two US funds: BNY Mellon US Equity Income, which has a high exposure to financials and healthcare, and Premier Miton US Opportunities, which has a bias towards mid-size and smaller companies.
“We believe all these areas will benefit from the continued strength in the US market, but which will see leadership broaden out from the mega-cap tech stocks that have dominated proceedings for some time now,” Burns explained.
The Core Growth, Adventurous and Maximum Growth model portfolios have an additional two US funds, which also received a greater allocation in the latest rebalancing: GQG Partners US Equity and Vanguard US Equity Index.
Premier Miton US Opportunities was added to the Core Income model portfolio. To make room, allocations were cut back to L&G UK 100 Index Trust, Premier Miton UK Multi Cap Income and HSBC European Index.
Across its portfolios, Evelyn Partners increased exposure to US treasury inflation-protected securities (TIPS) through the CG Dollar fund because it expects inflation to remain elevated in the US.
Conversely, the wealth manager expects UK growth to be anaemic, so it increased its exposure to UK gilts at the expense of US treasuries and reduced its allocation to UK index-linked bonds.
“Within the corporate bond allocation we made a minor change to ensure that our exposure here is very much slanted towards short duration bonds,” Burns added. Here, the wealth manager uses Artemis Corporate Bond.