Jason Britton, the manager of the T Bailey Growth fund, has added six exchange traded funds (ETFs) to the portfolio over the past year.
Although Britton holds more ETFs than ever before, he is not moving towards creating an ETF fund of funds.
Britton and his co-manager, Elliot Farley, use ETFs for various reasons. “We use them where we want to complete an asset allocation quite quickly,” he says. “Or where we want an active manager but are not sure which one, we hold an ETF until we have found the right one.”
Furthermore, Britton uses ETFs when investing in efficient markets, such as the Americas, where not many fund managers can outperform their benchmarks.
One of his top-performing ETFs, for example, is the iShares Brazil ETF. Britton added the holding last year when he wanted to invest in Brazil.
Among the actively managed funds that had asset allocations in Brazil, Britton did not find a suitable investment.
“Our options were either general emerging markets funds, Bric funds or Latin American funds,” he says. Emerging markets funds were too diverse.
Bric funds also meant exposure to Russia, India and China, none of which he was positive on, whereas Latin America funds generally had big holdings in Mexico, which he was not positive on either.
“There aren’t that many funds that invest in Brazil only,” he says. “And even if there is a fund that invests purely in Brazil, it does not mean that the fund manger is good.”
The latest ETF addition was the FTSE 100, which Britton made in July. Yet the T Bailey Growth fund is run on the same basis as before, with asset allocation being the key driver.
More recently, Britton turned to actively managed funds. He increased the portfolio’s weighting to Europe excluding UK by buying the BlackRock European Dynamic fund.
He also banked some of the gains made during the year in the Asia Pacific region following a period of strong performance and sold his holding in the iShares MSCI Japan index while adding the Majedie UK Equity fund.