The £147.7m Mercury Asset Allocator investment trust run by Andrew Dalton is overweight equities and...
The £147.7m Mercury Asset Allocator investment trust run by Andrew Dalton is overweight equities and underweight bonds.
The trust has an internal benchmark of 75% MSCI World Equities Index and 25% Salomon Smith Barney World Government Bond Index. The fund is marginally overweight this benchmark in equities due to individual opportunities being presented in the market.
Launched on 1 April 1999, Mercury Asset Allocator is ranked four out of 15 trusts in the International General sector over one year and 15 out of 15 over three months, on a share price basis. It is trading at a premium to NAV of 2.2%.
The fund is managed by Merrill Lynch Asset Management's total return team, headed by Dalton. The team combines an active top down asset allocation process with bottom up stock selection.
Dalton said: "The team seeks to identify and exploit both strategic and tactical opportunities in the world's equity and fixed-income markets. The basic decisions are founded upon four strategic factors: liquidity, earnings momentum, interest rate movements and valuation."
Geographically, the trust is skewed toward the US, where Dalton expects there will be strong buying opportunities, based on setbacks in the economy and volatile markets.
He also favours Europe, including UK, based on strong growth expected to arise as this market catches up to the US. The trust is negative on Japan, due to the unwinding of cross shareholdings among banks.
He said: "Japan is a real problem because many Japanese banks have to unwind their cross share holdings. They have spent the last five years doing this and have only been successful in unwinding some 20% of the total and there is a lot more to go. Meanwhile land prices are falling and the debt picture is negative."
As of the start of July the trust had 33% exposure to the US followed by 23.4% in continental Europe, while the third most popular destination for funds was cash and fixed interest at 21%. The next highest weighting was to Japan and UK, each with 7.8%, followed by emerging markets at 2.4% and Hong Kong at 1.2%. Other country investments made up 3.4% of the trust.
Top 10 holdings in the trust are General Electric with a 1.6% portfolio exposure, Intel Corp at 1.5%, Cisco Systems at 1.3%, and Sun Microsystems, American International Group, Nortel Networks and Walgren, each at 1.2%. EMC Corp, Citigroup and Merck & Co each represent 1.1% of the portfolio.
The Mercury banner is to disappear off its unit trusts next month and be replaced with that of Merrill Lynch. Mercury Asset Management became Merrill Lynch Investment Managers earlier this year. The group will retain the Mercury title for its Luxembourg-domiciled Sicavs, The Mercury Selected Trust and the Mercury Offshore Sterling Trust.
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