Aberdeen fund is back in Europe

Aidan Kearney’s Aberdeen Multi-Manager Multi Asset Distribution Portfolio has taken a 2-3 per cent weighting in Europe via the BlackRock Continental European Income fund

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Aberdeen’s Aidan Kearney recently initiated a position in Europe in the £56m Multi-Manager Multi Asset Distribution Portfolio, having previously had zero exposure to the region.

Kearney bought into the £50m BlackRock Continental European Income, managed by Andreas Zoellinger and Alice Gaskell. The fund is currently a 2 to 3 per cent position, which Kearney is building up.

“We had been at a zero weighting in Europe for sometime in this fund, but in the late summer we bought into Europe in all of the funds where we were underweight,” Kearney says.

“BlackRock Continental European Income is an interesting portfolio; investors typically go for Alister Hibbert’s BlackRock European Dynamic fund, but with Continental European Income you get the dividend side while it is actually a core fund. Its exposure to European equities is not biased to one style or sector. We were looking for a core, stable fund. This is the only fund we hold it in.”

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Kearney has also reduced the fund’s cash weighting from 3-4 per cent to less than 1 per cent since the summer. About 8 per cent of the portfolio is hedged through FTSE and S&P futures.

“In all of the funds we have introduced 6 to 7 per cent FTSE and S&P protection, for downside protection. It is higher in this portfolio at 8 per cent, reflecting the fact we are more fully invested to get the yield flow,” Kearney says.

Over the year to 26 October, the fund is up 10.45 per cent versus IMA Mixed Investment 20-60% Shares sector average of 6.99 per cent, according to Morningstar, ranking it eighth in the peer group.

Kearney picks out offshore funds Prusik Asian Equity Income and Invesco Sterling Bond as key contributors to performance.

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“We have had Invesco Sterling Bond for a long time,” Kearney says. “Most people hold the flagship Corporate Bond fund, but we have the offshore fund run by Michael Matthews, which most people ignore, but he is incentivised to perform, sitting with Paul Read and Paul Causer. He steps up the level of risk and holds a little more in financials, which obviously helps.

“Invesco Sterling Bond is up 16 per cent year-to-date. We hold it against a more defensive fund, Bluebay Investment Grade Bond – which is much more conservative and is up 13 per cent. We look at them as pairing off.”

He adds: “Prusik Asian Income is up 28 per cent year-to-date. We have held it for over a year. It is a fairly new fund and is not on investors’ radar screens. We went into the fund early on. Manager Tom Naughton focuses on dividends. By his own admission, the fund has done better than he thought. It has a good spread of Asian companies, and is something new and different. Tom also looks at quality. He has a portfolio of 40 to 50 holdings and a strong bias to franchises.”

Kearney reckons there are more opportunities in the Asian Income space, and is eyeing up new funds in the space.

“Long term we are happy with Asia, and as we see more strategies focusing on dividends, they will attract us. There are more and more strategies coming to market that will interest us.”