Asset class plays propel performance

Getting early into European equities and positions in UK smaller company funds have helped the Premier Multi Asset Income & Growth fund to stronger performance in 2012

FS Adam Lewis 160 byline

Having struggled in 2011 the Premier Multi Asset Income & Growth fund has bounced back this year, with the fund propelled to second spot in the IMA Mixed Investment 40%-85% Shares over 12 months to 19 October, according to Morningstar.

Over this time period the fund returned 15.37 per cent versus the sector average – previously known as the Balanced sector – which returned 10.06 per cent. This follows a discrete annual performance of -6.8 per cent for 2011.

David Hambidge, investment director, pooled funds at Premier and lead manager of the fund, says the bounce back in performance has been primarily asset-class driven rather than from any beta plays. Indeed the fund is at the lower end of the equity spectrum, holding less than 70 per cent over the past 12 months against the maximum 85 per cent weighting allowed for in the sector.

“We were early into Europe which helped performance,” says Hambidge. “We started building our position in European equities – not the euro – in the fourth quarter last year. This was through a combination of conventional long only funds, such as Baillie Gifford Europe, and a EuroSoxx50 structured investment,  which has returned in excess of 30 per cent for the year so far.”

Hambidge says this fund, which is only just over £18m in size, is designed for investors who take a long-term investment view on equities and like a dividend. Indeed the fund has a minimum 2.5 per cent yield, with the current yield coming in at 2.7 per cent.

In terms of risk he says the fund is taking a neutral stance at present. As the financial headlines swing between despair and hope on a weekly basis he says it has been easy to have become whip-sawed over the last 12 months.

“We are determined we won’t let this happen,” he says. “Our view on the world has not changed at all. It is pretty tough out there and it looks likely to stay that way for some time to come. However this does not mean we cannot find good investments.”

For his long only positions Hambidge uses a mix of open-ended and closed-ended funds. At present about 20 per cent of the portfolio in investment trusts. These are namely in commercial property trusts and a number of alternative assets, such as listed infrastructure, that he cannot access via an open-ended vehicles.

“Any asset that is illiquid is better suited to a closed-ended structure,” he says.

In recent months the manager says the funds UK equity exposure has proved useful and the country is the fund’s largest equity exposure on a regional basis. Year-to-date he says positions in UK smaller company funds have led the pack which Hambidge says defies those who suggested a weak UK economy meant shares in such companies would underperform.

In terms of future risks Hambidge is conscious of interest rates. “I would not be surprised if the next shock to markets is an interest rate shock,” he says. “The market is expecting another market blow up, but a growth surprise could lead to an interest rate rise which would be the big shock. As such I am holding more in floating rate debt than I have ever had.”

Indeed of the fund’s current 11 per cent bond weighting the manager says almost half is in floating rate notes.