Equity bulls charge back to the top

The managers of Henderson Multi-Manager Balanced reject gloomy market views and embrace British equities and frontier markets, a stance borne out by the portfolio’s recent performance.


Mark Harris and Craig Heron, the co-managers of the Henderson Multi-Manager Balanced fund, are far from shy when it comes to expressing their views on the market.

”We’ve more value in the portfolio that we’ve ever had before”

Both are candid about the difficulties the fund faced over a six-month period from the end of 2008 to the end of the first quarter of 2009. The damage to the cumulative performance over three and five years is apparent with the fund sitting fourth quartile over both.

What these statistics ignore, however, is the impressive recovery that the fund has staged over the past 12 months. In the past year the Multi-Manager Balanced fund has climbed back into the second quartile, returning 10.2% against an average 8.8% from the Investment Management Association Balanced Managed sector. (article continues below)

Heron says the managers’ growing optimism on equity markets, a position that they have maintained as the year progressed, has driven the portfolio’s performance.

While the scale of the move, which some market analysts suggest could be as much as $400 billion (£252 billion), might be reassuring for some equity investors there is a concern over its possible impact on the dollar exchange rate.

“Everyone’s positioned for dollar weakening,” Harris says. “In circumstances like we’re in at the moment currencies will always take the strain and we think there is more to come in terms of competitive devaluation. We don’t want to be taking currency positions this year.”

To back up their faith in equity markets over bonds the fund has 35.4% exposure to British equities. Another area that the managers are excited about, however, is frontier markets where some of the markets, Harris says, are trading on 10 times earnings with 20% annual growth.

The message that comes out of the Henderson multi-manager team it is that sentiment towards the market may be too gloomy, but volatility is a concern. Under these conditions active managers should outperform buy-and-hold investors.

“We buying strategic bond funds that can take advantage of opportunities across the fixed income sector,” says Harris. “On the equities side managers should be looking for companies that are trading cheaply but can benefit from emerging market structural growth. We’ve more value in the portfolio that we’ve ever had before.”