Matthew Williams tells Joanna Faith why he is happy to invest in European equities and fixed income and why he is backing corporate over government bonds.
The “low-risk” Prudential Managed Defensive fund was launched in February 2007, at a time when it was unfashionable to talk about any valid low-risk investment strategies other than cash.
The Lehman crash was still seven months away and very few people could have envisaged the volatility and chaos that ensued. The multi-asset portfolio invests in equities, bonds, property, a small amount of alternatives as well as cash and floating rate notes.
It has returned 24.65% over five years to 24 August, compared to a sector average of 15.62%, according to FE data.
Prudential's Matthew Williams on why Europe is cheap
What have been the main drivers of performance in the past five years?
The fund has benefited from its concentration in bonds, and notably in corporate bonds more recently. We significantly increased our exposure to corporate bonds coming out of the credit crunch when that market was cheap. We have also had a reasonably chunky weighting in equity and commercial property.
Over the life of the fund, including the past five years, we have tilted in and out of asset markets as we feel right. We have no alchemy. There is a lot of hard thinking about where value is in markets and when is the right time to make changes.
You have significant exposure to Europe. Are you not concerned about the impact of the ongoing sovereign debt crisis?
We own the M&G European Corporate Bond fund and M&G Pan European vehicle. We think Europe is cheap in terms of equity markets.
Our view is, not withstanding the weak nature of the economy and risks we see in economic terms, the pricing of investment markets is pretty cheap at the moment and on standard metrics, equities are stand out cheap.
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