signs of a modest but sustainable global recovery have lead firm to hold more equities in its balanced pension fund than the peer average
Signs of a modest but sustainable global economic recovery have led Britannic to hold a slight overweight equity position in its Balanced Pension fund relative to the average of its peer funds.
With just under £1.6bn in assets under management, the Britannic Investment Managers Balanced fund is one of the largest balanced pension funds in the Russell Mellon CAPS index.
Graeme Johnston, investment director at Britannic, said the portfolio make-up is based on the belief a modest global recovery is under way that is 'uninspiring but sustainable.'
Corporate profits will start to stabilise and grow as the effects of the recovery filter through, he added.
Johnston favours Europe, Pacific ex-Japan and Japan as he believes these areas are sensitive to a global upturn and will benefit from any economic recovery.
At the end of June, Asset allocation for the fund stood at 53.4% UK equities, 28.7% overseas equities, 7.9% UK bonds, 4.5% overseas bonds, 5.3% property and 0.2% cash.
The UK equity holding was modestly overweight compared to the average of the surveyed funds, which stood at 53.2%. Overseas equities were also overweight the average, by 1.6%.
Allocation breakdown within overseas equities is split between North America on 5.1%, Europe on 14.4%, Japan on 4.5% and Pacific ex-Japan on 4.7%, with nil in emerging markets.
Fellow investment manager at Britannic Margaret McLaren said, within its European holdings, the portfolio has a fairly defensive bias, with overweight positions against the FTSE Europe ex-UK in foods, pharmaceuticals, forestry and paper, energy, steel and construction.
The technology, telecoms retail and leisure industries are all underweight holdings, she added. Financials are neutral within Europe, she said, with an overweight position in banks and underweight insurance.
Johnston will look to trim the Japanese holdings in the near future, although he will maintain an overweight position as he believes sentiment is turning on Japan.
Johnston said: 'At the start of the year, we felt sentiment was too negative on Japan. The consensus was that it would be stuck in recession.'
This overly bearish view indicated promising upside in the market, he said. However, now opinion has turned and investors are increasing exposure, it is harder to find attractively valued stocks.
Johnston's position in the Pacific ex-Japan markets is likewise overweight as he believes these economies are well positioned to benefit from an upturn.
'Many of these countries are dependent on manufacturing and trade and will benefit from a recovery,' he said.
The Britannic fund is ranked 33 out of 86 funds in the sector for performance in the year to the end of June, with a fall of 6.8%. This position contrasts with that of the St James's Place GAM fund, which is the top performing fund for the year to end of June, generating a 4.9% return.
The fund has a radically different profile from Britannic's, with a substantial cash holding, at 21%, overseas equities at 41%, exceeding UK equities, 38%, and nil weightings in fixed interest, all as at the end of June.
Looking at the longer-term picture, returns on the Britannic fund are positive, at 2.2% over five years and 9.7% over 10. The performance of the Britannic fund has slipped relative to its peers over the longer term, with a rating of 11 out of 49 funds over 10 years.
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