Q: What is your asset allocation approach?
In terms of fund selection, the common approach is that it is all about the manager, and identifying the manager who has the skill, but we are also inclined to see funds as being a series of underlying bets. In the early part of this year our UK portfolio was heavily exposed to defensive funds and stocks. In February we changed that substantially and moved to more of a mid-cap bias, because we thought it had underperformed, and a bit more of a cyclical bias. We did that by buying Henderson Income and Old Mutual UK Select Mid Cap.
Q: How do you manage risk?
We put a lot of effort into making sure that at any one time there are a number of themes and bets in the portfolio – one way we differentiate against peers. Rather than back one or two ideas at any one time we’ll back 6, 7, 8 or even 10 ideas, which should deliver a smoother, less volatile ride and less risky ride.
One of the benefits is it allows us to be patient with some of the ideas we have.
Q: What factors helped your portfolios achieve their performance over the past year?
The fact we had overseas currencies last year certainly helped.
Secondly, we decided right in the middle of last year that a global recession looked likely. As a result of that we took a reasonable chunk of equity out of the portfolio and replaced it with government bonds.
The third thing was our manager selection last year and into this year has been good. We identified a set of quality managers who, when things got difficult in 2008 did a good job in reorientating their portfolios for a difficult environment.
Henderson New Star Multi Manager performance vs sectors
Top 10 holdings
Distribution fund
Income & Growth fund
Growth fund
Q: What is your outlook for the next 6-12 months?
We have got a decent sized bet on non-Japan Asia.
I would argue Asia is financially stronger than either Europe or the US for the simple reason it does not have the same debt burden. You see it at the country and company level and among individuals – they are not geared, and that gives them a robustness.
Alongside that is the outlook for currency. My view is the tendency will be for the Chinese currency and by extension other Asian currencies to appreciate against Western currencies. We are also quite positive on Japan - an anti-consensual view.
I think the banking sector could be an interesting one on a 12-month view - if you own the right stuff.
Q: Have the challenges of the recent past for long-only fund managers led to any strategic or tactical changes in particular?
I do not think so, we have all been in the same boat, having to work hard to protect investment capital.
Q: Do the funds appeal to a certain type of investor?
The Distribution and Income & Growth funds are similar, but with one important difference; we try to keep the yield on the Distribution fund ideally above the 4 per cent level, so it is really for people who have a need for regular income.
The Income & Growth I see as an ‘all weather’ fund. We try to protect capital when the going is difficult and to make money when the markets in better shape.
The Growth fund as the name suggests is for people who are looking for a vehicle that predominantly gives exposure to equity markets or riskier assets.