The Baillie Gifford Managed fund has an 84% bias towards equities, 54% of which is in the UK, says J...
The Baillie Gifford Managed fund has an 84% bias towards equities, 54% of which is in the UK, says John Carson, head of the institutional clients department at Baillie Gifford.
He says: 'The current policy is to be relatively neutral against the benchmark as far as bonds and equities are concerned. There is uncertainty over the future of the economy so we are unwilling at present to move away from the benchmark.'
The Merrill Lynch Balanced Portfolio fund is also maintaining its bias towards shares over bonds, according to Keith Mullins, fund manager at Merrill Lynch. He says: 'Bond yields drifted up as interest rate cuts improved investor appetite for riskier assets. The prospect of an early referendum on the euro pushed long-dated UK Government bond yields higher. This benefited the fund as we were underweight and we took advantage of the relative outperformance of eurozone bonds, switching partially into sterling corporate bonds.'
Within equities, the Baillie Gifford Managed portfolio is overweight the US and underweight Europe. Carson says: 'This is a result of the bottom-up approach we take, rather than having employed any specific macro themes. Currently, it is easier to find well-managed growth stocks in the US. Many of the good European companies are telecoms or technology, which are suffering at the moment.
'The portfolio is positioned fairly defensively as we only want to invest in companies where there is reliable growth going forward and good visibility. This is why we are underweight the telecom sector and overweight defensives such as beverages and tobacco.'
The fund has a large holding in Phillip Morris in the US. Carson says: 'Phillip Morris is lowly rated and has a history of good earnings growth. There is some concern over the litigation in the US but we believe the recent large award will be substantially reduced on appeal. Additionally, not much of the share price is dependent on the US as it owns Kraft and has a large international business.'
Before changing the current investment stance, Carson would like to see signs of improvement in the global economy and corporate sector. He adds: 'We are keeping the weightings under close review in these uncertain times.'
Mullins is optimistic about the global economy. He says: 'We are encouraged about the prospects for economic recovery. We expect to maintain our slight emphasis on technology, media and telecoms and economically sensitive shares over typically defensive areas. Our largest holdings are BP Amoco, Vodafone and GlaxoSmithKline.'
Carson will remain defensively positioned and is hoping to see further US rate cuts, resulting in higher economic activity and a better environment for corporate profits. He says: 'When we see an improvement, we will invest in more highly rated stocks.'
He has moved from underweight to neutral in Japan as good earnings growth and market weakness has brought Japanese shares to levels seen in the mid-1980s prior to the bubble. He says: 'Companies seem to be restructuring and concentrating on profit rather than volume. It is possible we will move overweight Japan as we have been finding a lot of good companies.'
Attractive companies in Japan.
Prospects for economic recovery.
Equities preferable to bonds.
Since November 2008
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