When Graham Duce and Aidan Kearney, joint-heads of multi-manager services, took over running the Credit Suisse Cautious Managed Portfolio early last year one of their first moves was to broaden the holdings.
“It’s a Nurs [Non-Ucits retail scheme] fund, and the full Nurs capability wasn’t being utilised,” says Kearney. “We expanded the fund to include listed alternatives such as funds of hedge funds (FOHF), and exchange traded fund (ETF) positions such as gold.”
The fund has also been in and out of structured products. “It has more multi-asset characteristics. But it’s still managed to its original core beliefs and principles. We’ve 10-11% in these other areas,” says Kearney.
This includes holdings in Brevin Howard’s Global fund and Dexion Absolute. “These are big, quality FOHF products. Having 5-6% just gives us an alternative class,” Kearney adds.
When gold started to slip back the fund took a position via an ETF. “As it got cheaper it looked more attractive,” he says. “The speculators have largely been washed out. Over each week we’re turning a profit and banking it.” In addition, Kearney took a position in the RWC Global Convertibles fund which he has previously owned and which, he says, offers attractive, defensive characteristics.
Since December 2007 the fund’s British equities position has been reduced by 10% to 28%. The fund was one of the early holders of Mark Lyttleton’s BlackRock UK Absolute Alpha fund. “It’s struggled over the past couple of months but it’s still held up exceptionally well on a relative basis,” says Kearney.
The British equity portion of the fund also has a liberal smattering of income funds, and a bias towards large cap with holdings such as M&G UK Select.
In fixed income, Kearney says the fund was probably too tilted towards credit at the latter end of last year. “We’ve still got some exposure, although it’s been a bit expensive for us. Global bond exposure has helped us, and we have some Asian bond positions. We’ve got very good diversified fixed income exposure. That’s why it’s stayed around one third of the portfolio.”
Throughout the course of this year ETFs were used to move in and out of the market without disturbing the underlying fund positions. “You can exercise a bit more control, and leave managers in whom you have conviction to do their job. We’re in a unique market environment at the moment; where it’s appropriate we can, at the margin, add a bit more value by using ETFs.”
Kearney is keeping some cash on the sidelines to look at opportunities, but is happy to leave the bulk of the money at work with managers he has trusted for a long time. “We’ve still got 40% of the portfolio in equities.
We’re still in the market. The sharpest rallies tend to be bear market rallies and there will be opportunities to make money. It’s not always a negative story – we will come out of it on the other side. When it gets better we have to be in the right funds and claw back some of the value for investors.”