F&C plays safe with bigger strategy

F&C Multi-Manager Balanced raised its bias to large caps since Dean Cheeseman, the head of multi-manager, joined in May. But it remains underweight America - even though it \"looks cheap\".


F&C Multi-Manager Balanced raised its bias to large caps since Dean Cheeseman, the head of multi-manager, joined in May. But it remains underweight America – even though it “looks cheap”.The £100m F&C Multi-Manager Balanced fund has increased its large cap bias since Dean Cheeseman became head of multi-manager at the group and took over management of the fund in May. Since Cheeseman took over from Richard Philbin, the former head of multi-manager at F&C, the slant within the portfolio has changed. However, the process and team approach remains the same.

The F&C Multi-Manager Balanced fund was launched in 1993 and aims to provide income from a lower-risk portfolio of authorised collective investment schemes. These funds tend to be invested in Britain and include fixed interest securities.

As at October 17, there were 19 holdings within the portfolio. The two with the largest weightings are the Schroder UK Alpha Plus fund, at 7.46%, and the Threadneedle UK Equity Alpha Income fund, at 7.36%.

Paul Carne, a fund manager at F&C and part of the team that manages the fund with Cheeseman, says these funds represent the overall split within the UK equities segment of the portfolio. According to Carne, the Schroder fund, alongside the BlackRock UK Absolute Alpha fund, which has a weighting of 6.49%, represent a more pro-cyclical stance. Meanwhile, the Threadneedle fund, alongside the Artemis Income fund, which has a weighting of 5.39%, are both income portfolios, that focus heavily on cash-flow yield.

“There’s a bit of a barbell going on in the UK [portfolio],” says Carne. “They are significant weights and we are trying to balance those. We are trying to put those funds together and balance off some market risks.”

Two weeks ago the fund increased its exposure to equities, if only by 1%. Carne says this was because equities look over-sold. However, he says they remain cautious and the fund’s weighting is still “pretty neutral” to equities.

“It has been an uncomfortable two weeks, but we don’t think equities are over-valued,” says Carne. “Equities look like very good value at the moment. If the risks in the financial sector continue abating, we’ll be tempted to come in and realise that value.”

The fund reduced its allocation to cash, which stands at less than 5%. In its place the weighting to high-quality corporate bonds was increased. The largest bond fund weighting in the portfolio as at October 17, is 7.35% in the Invesco Perpetual Fixed Interest Monthly Income fund. The second largest is 5.97% in the Baillie Gifford UK Corporate Bond fund.

The portfolio’s overweight to Asia still remains despite cutting back the First State Asia Pacific fund, which stands at 5.93%. Carne says the fund, which is managed by Martin Lau, has produced good levels of alpha. The F&C Multi-Manager Balanced fund has a neutral weighting in Europe and Japan and a slight overweight in Britain. Its underweight in America continues, mainly due to not having found a suitable fund with which to increase it, says Carne. “The US does look quite cheap,” he says. “But it’s really about the fund. Until we find managers we’re a lot more comfortable with we won’t increase it.”