Team Talk - Cheryl BournePosted in Financial Planning,
on 18.03.21 Read There are many things that make Fiducia a little bit different, such as our beautiful location in the heart of the Dedham Vale...
How Covid-19 is affecting wealth management and our services. Our team continues to be fully operational during these unusual times. As ever, we look forward to servicing you at the very highest standard. For further details on our continuity plan and how this affects you please follow this link. Read more
The Growth Portfolio provides an investment solution for those clients who have a medium to high tolerance to and capacity for risk. The portfolio has a highly diversified strategy with weightings strongly skewed in favour of growth over defensive. The portfolio was composed based on our 10-year strategic view of the key themes that will drive returns going forward. Aligned to our strategic views are the shorter-term tactical view for each of the respective asset class and sectors. Below is a summary of some of the current tactical calls within the Growth Portfolio.
The pandemic’s impact is most keenly felt with the material uncertainty that clouds the outlook for this asset class. Going into 2021 we are maintaining the strategy we put in place in Q3 of last year, which is to avoid direct ‘bricks and mortar’ exposure, maintain a UK position via a generalist REIT with a relatively smaller exposure to UK Office Space and Retail, while directly allocating to one of the few growth themes within UK Property – Logics and Warehousing via the Urban Logistics REIT. In addition, we have diversified exposure away from the UK with the inclusion of the TR Property fund. This fund provides exposure to continental Europe with it’s largest holdings in Germany (31.8%). Recently added has been the iShares Asian Property yield ETF where we believe positive economic growth coupled with densely populated urban environments (e.g Hong Kong & Singapore), are less likely to be impacted by shift to homeworking than the western economies.
Prior to the pandemic the UK equity market was one of the cheapest worldwide despite offering a higher dividend yield than most relatively comparable markets. The discount can largely be explained by the uncertainty around Brexit and prior to that by the spectre of a Labour government. Minded of this our positioning was to be overweight the UK going into 2020. The pandemic knocked off course the anticipated recovery and with it the FTSE 100, largely due to the underperformance of Financials and the Oil majors. With Brexit ‘resolved’, oil prices now back over $50 mark and a positive yield curve being beneficial for Financials, the UK should make up some ground in 2021 in our opinion, as global asset allocators warm back up to allocating to Sterling assets. Our strategy is to gain exposure to a mix of small/ mid-cap funds and large cap funds, with a skew to the former. Small and mid-cap exposure is via the Marlborough Special Situations, Downing Unique Opportunities and Slater Recovery funds and larger caps through TB Evenlode Income and Finsbury Growth and Income.
Going into 2021 we are maintaining the tactical strategy, commenced in Q3 2020, of thematic investing with exposure to sectors that have, continue to and ultimately will be the winners, from an investment perspective of the post pandemic world – Healthcare and Technology. The former via the Worldwide Healthcare Trust and the later via Scottish Mortgage Investment Trust and First Trust Cloud Computing ETF. The First Trust ETF is a direct play on the technology ecosystem that sits below the FAANGs (Facebook, Amazon, Apple, Netflix & Google) that has become ubiquitous with the way we are all now leadings our lives. Online document/photo/file storage, the use of Zoom, electronic signatures, online shopping and cyber security to name but a few, are all essential to the whole online environment. Supporting this is one the leading global equity funds operating within the ESG (Ethical, Sustainable and Governance) sphere, the Royal London Sustainable World Trust.
We maintain our belief that the Emerging Markets, particularly in Asia are the most attractive equity markets at present given a blend of long-term drivers, shorter-term technical dynamics including the depreciation of the US Dollar, and reasonable valuations. As such we continue to pivot there with exposure via Baillie Gifford Pacific and Veritas Asia. Broader Global Emerging Exposure is gained by holding the Baillie Gifford Emerging Markets Leading Companies fund. In aggregate our exposure to Emerging Markets is dominated by investments in Asian companies given our confidence that the region will take strides forwards in coming years and decades. The newly added Sarasin Food & Agriculture fund also offers a thematic play into the changing patterns in the food chain, in large part stemming from the broadening out of the middle classes in Emerging economies as living standards rise.
Private Equity remains a good diversifier to standard equity funds and we believe there to be favourable dynamics for this asset class, chief among them are the availability of distressed assets and the need for swift turnarounds for which PE managers are renowned. Our current exposure within the Growth portfolio is to general PE and is principally via BMO Private Equity. However, we see Technology and Healthcare as two of the prime beneficiaries of the pandemic and beyond and have positions in this asset class to benefit accordingly. Our two favoured funds are HarbourVest Global Private Equity and Pantheon International which have approximately 45% of their portfolios positioned in these two themes.
In Q3 2020 we re-focussed our positioning to gain access to Renewable Infrastructure which we believe will be a prime beneficiary of global government spending designed to stimulate the world economy post pandemic, as well as to benefit from wider ESG trends. This strategy is complimented with exposure via the 3i Infrastructure funds exposure to the trend of digitalisation and the need to build related infrastructure, such as towers and data centres. This remains our current strategy. As an asset class our allocation to Infrastructure is part of a broader move to real assets in preparation for our base scenarios that we will see inflation rising over the next two years. Cash flows within this sector are typically inflation-linked on a contractual basis to a significant extent, helping such investments to protect capital against long-term rises in the price level.
In early June 2019 we took an early position in Gold as part of a broader move to real assets for preparation potential inflation and protection against market volatility. We maintain a position in Gold in anticipation both will remain in 2021. The elevation of government debt in response to the pandemic – and with that being from a very high starting point – further reinforces the benefits of viewing gold as a quasi-insurance policy against the long-term effects of currency debasement or longer-term inflation risks. In addition, with an in increase in the Commodities asset class as part of Strategic Asset Allocation review, we have added WisdomTree Industrial Materials ETF. Our aim with this strategy is to also gain exposure to the commodities that will power the next leg of both the digital and EV (electric vehicle) revolution during the recovery phase post-Covid.
Watch the Fiducia YouTube channel for our Economic and Market updates.View Channel
As part of our ongoing client communications, we like to regularly post quarterly Fund Manager Q&As, in an effort to give a...
The last few months have been difficult for everyone and we would like to start by wishing good health for you and your loved...
‘My house is my pension’
‘My business is my pension’
‘I will get full State Pension’
‘I am enrolled in a work...
Investing is intrinsically linked to global politics, industry, history and culture and the relationship between these factors...