In favour / out of favour

Neil Birrell

Premier Miton’s Chief Investment Officer 

Neil Birrell, Premier Miton’s Chief Investment Officer and manager of the Diversified fund range looks at the balance of the asset allocation and within the underlying asset classes across the range of funds

Managing a range of multi asset funds brings with it a non-stop succession of decisions that have to be made, which is why I surrounded myself with a very capable investment team of experts in different asset classes! That has been vital over the last few months, which have been frantic. But we seem to have a period of relative calm in markets. I have no idea how long it will last but I intend to make the most of it and it does provide a brief moment for reflection.

In favour, being balanced

We have made more asset allocation changes this year than in the history of the Diversified fund range. Individually, they have not always been large, but incrementally they have been significant. The equity weightings are at lows and in the Diversified Growth Fund and Diversified Dynamic Growth Fund we have ventured into bonds for the first time in, well, I can’t remember when. These are meaningful changes. They have been driven by the markedly changed economic and financial market conditions that we have experienced over the last year or so.

Don’t worry; I am not about to launch into a discussion about inflation and rising interest rates or the imminent demise of the FAANGs or staggering value that can be found in the UK equity market; you have read that here or elsewhere before. This is more about how, when I look at the funds today, I have a high degree of comfort in their structure and overall profile across and within asset classes.

If we go on a tour of the asset classes.

Bonds; there is now more return available for less risk than there has been for many, many years. As we wrote about last month, we have increased the exposure across the range of funds, but not in an aggressive manner or taking on unwanted risk. Let’s not forget inflation and interest rates are still going up; that is not usually a good backdrop for bonds. But, they have fallen a long way and are, arguably, discounting much of the bad news. Adding to the weighting in bonds and increasing the risk profile over time, strikes us as a balanced approach. We do not know what is going to happen.

In equities, much has been made of the ‘“growth’” and ‘“value’” factors over the last few years. We seek to invest in good quality companies, that are growing more than their peers at attractive valuations. We have never been ‘“growth’” or ‘“value’” investors, although we have made more investments in companies at the growth end of the spectrum. We seek companies that do well though different economic conditions. But, through this year we have been adjusting our exposure and adding to companies that are more likely to benefit, relatively, in weaker economic conditions. A pragmatic approach as we enter more uncertain times.

The exposure to property is via listed property companies; as we discussed in the note a month ago, they have had a torrid time recently, although we are big believers in the long term prospects for the asset class. Importantly, within the asset class we seek those subsectors that we consider to have the best prospects and companies we believe have management teams that can add value. Given the short term uncertainty, we have dialled back our appetite for the asset class, to keep the overall risk of the funds where we want it.

Alternative investments have always played an important role in the funds. They provide interesting investment opportunities, diversification and, typically, a lower correlation to bond and equity markets. In themselves, they provide a balance to the investment portfolios.

I have referenced the uncertain outlook more than once, and it certainly is. Although, there is always a level of uncertainty, it is heightened at present. This is why we employ an active approach to the portfolio hedges; to provide insurance policies in periods of market weakness.

To repeat myself; I feel comfortable with the asset allocation across the range of funds and what the investment team are doing within each asset class. In my view these provide balance in an uncertain period. But, of course, I could be wrong.

Out of favour; sole traders
The financial market conditions we have been enduring can take their toll on investors; amateur and professional alike.

It has been very instructive and encouraging to watch the Diversified funds investment team through the turmoil. The level of interaction, discussion, debate and, indeed, disagreement in a collegiate and constructive manner. This has in my view, led to good investment decisions being made. We have remained focused on the specific risk / reward profiles of each fund and the underlying asset class positions has been important part of that.

None of that means the funds will necessarily produce investment returns that compare well to peers or market indices, but, in my view, it gives us a better chance of doing so.

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Risks

The value of investments may fluctuate which will cause fund prices to fall as well as rise and investors may not get back the original amount invested.

Property values can rise and fall sharply depending on the strength of a country’s economy.

Alternative investments typically behave differently to traditional investments such as bonds and equities. They can include a range of assets such as specialist lending, private equity, hedge funds and gold. Adding alternative investments to a portfolio can help to make it more diverse but can also make it more volatile.

Government and corporate bonds generally offer a fixed level of interest to investors, so their value can be affected by changes in interest rates. When central bank interest rates fall, investors may be prepared to pay more for bonds and bond prices tend to rise. If interest rates rise, bonds may be less valuable to investors and their prices can fall.

A hedge is designed to offset the risk of another investment falling in price. It can also act as a limit on potential gains if the investment that has been hedged increases in value.

Some of the Diversified funds may experience high volatility due to the composition of the portfolio or the portfolio management techniques used.

Future forecasts are not reliable indictors of future returns.

IMPORTANT INFORMATION:

For Investment Professionals only. No other persons should rely on any information contained in this document.

Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice.

All data is sourced to Premier Miton unless otherwise stated. Persons who do not have professional experience in matters relating to investments should not rely on the content of this document.

For your protection, calls may be monitored and recorded for training and quality assurance purposes.

A free, English language copy of the fund range’s full prospectus, the Key Investor Information Document and Supplementary Information Document are available on the Premier Miton website, or you can request copies by calling us on 01483 306090.

Financial Promotion is issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227. Both companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE.

008038/071122

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The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

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The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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This section of the website and the content it contains is for retail clients only and by persons who are resident in the United Kingdom [who are not US persons]. Professional advisers should refer to the Professional Advisers site.

The content of the pages of this website is for your general information only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell or purchase shares in the funds or portfolios or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

Website terms of use: Please ensure you have read and accept the full 'website terms of use' before continuing.

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Disclaimer

This section of the website and the content it contains is for professional financial advisers only and should not be relied upon, or circulated to, retail clients. Retail clients should refer to the Private Investor's site.

The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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