The Premier Multi-Asset Growth fund bounced back after a ropey first six months - a result, says the manager, of the portfolio’s strong bias towards convertibles and structured products.
David Hambidge, the investment director at Premier Asset Management and the manager of the Premier Multi-Asset Growth fund, is a big advocate of the multi-asset approach. In the summer of 2008 he took the opportunity to convert the fund from a more traditional equity and bond portfolio to a multi-asset vehicle.
“We felt the world was going more multi-asset,” says Hambidge. “It was falling out of love with equities. We recognised that even though the fund had performed well against its sector and benchmark, we had to move with the times.”
The timing of the move, unfortunately, could not have been worse, says Hambidge. “We were looking for better risk-adjusted returns, and that didn’t happen in the first six months. We were caught up in assets where people were forced sellers. The first six months were hugely disappointing but our recovery in 2009 was really borne out of not being in risk assets at all. Instead, we were buying convertibles and structured products, which bounced back massively in 2009.” (article continues below)
The fund has just 1% in emerging markets and nothing in commodities – two of the biggest drivers of global market performance in 2009. “We hold lower-risk assets,” says Hambidge. “It was really a question of biding our time.” While Hambidge describes performance this year as slightly pedestrian, he is comfortable with the reasons behind it. “One is sterling; we believe a lot of managed funds have too much exposure to overseas currency. On the positive side, volatility is much reduced from when we had an equity bias, perhaps at the expense of a little bit of capital growth.”
About 23% of the portfolio is in structured products, with Hambidge pointing out that no market growth is required to give a positive return. “On balance this year they have given us relative returns equivalent to open-ended funds but the key is how they perform if markets come off.
“I still believe markets are range bound; we are in structured products because they work particularly well in these markets. As a basket they work really well in dampening volatility while not giving up upside.”
Geographically, the fund is overweight Japan, which Hambidge says is fundamentally cheap, and Europe; with underweight positions in Asia, emerging markets and America. Emerging market exposure may be increased – Hambidge is looking closely at a closed-ended frontier markets product. On the fixed income side, holdings are relatively short duration. “We’re looking to up equities a bit and keep our sterling positions,” he adds.