Tom Yeowart prefers to take a softly-softly approach to fund management, gradually increasing the managers he invests with in the Troy Asset Management Spectrum fund, rather than making big allocation switches.
At present the manager of the £86m fund is increasing his cash levels as he remains wary about valuations in the equity markets.
“Our asset allocation is driven by our view on equity valuations,” says Yeowart. “At times, this will mean that we have the majority of our assets in long-only equity funds. But in general developed market valuations are relatively high and in the US in particular valuations have risen to a lofty level, while earnings growth has stalled.”
Because of this, the manager is sitting on more cash than is usual for the fund. The cash holding is 7 per cent, although the figure is higher when all the cash held in the funds in which it invests is included.
“It is sensible to have some diversification away from equity markets, but I can’t hide in fixed income as the asset class looks very expensive,” Yeowart says. He also wants to keep some dry powder for when equity valuations do come down.
Yeowart joined Troy Asset Management 18 months ago, coming from three years at Rothschild, where he focused on fund research. It’s not his first fund manager role. He was a fund manager at Kaupthing Singer & Friedlander and then Williams de Broe after it acquired the Singer & Friedlander Wealth Management business. Since becoming sole manager on the Spectrum fund in September 2014 – it was previously run by a team – Yeowart has replaced some funds entirely and has brought in new managers that he had more conviction in.
The fund has 23 positions at present, which is at the higher end of what Yeowart is comfortable with, saying he would not want it to get above 26. Most recently he initiated a new position in Aurora Investment Trust after it was taken over by Phoenix Asset Management.
He is a true believer in spending time meeting managers, discussing portfolios and drilling down into asset allocation rather than relying on quantitative screens to do some of the work for him. He has met about 200 managers in his first 18 months in the role.
In particular, Yeowart thinks quantitative screens as a first step to manager meetings can hide some gems or managers currently down on their luck who might deliver in the future. He gives the example of the Yacktman US fund, which he has a 6.6 per cent allocation to. The fund invests in US firms such as Pepsi, 21st Century Fox, Procter & Gamble and Coca-Cola, which have not performed well in recent months, leading the fund to underperform. But the companies are investing for the future, Yeowart reckons, and the fund will deliver over the longer term.
The Troy preference is to invest with boutique managers, and Yeowart buys into that. “Large asset managers have more pressure to build and grow each year.”
Yeowart is also keen to find younger, up-and-coming managers to slot into the portfolio alongside those with 20-plus years of track record. Current examples include the increasingly popular Evenlode Income fund, run by Ben Peters and Hugh Yarrow, which is a 5.8 per cent position, and James Hanbury at Odey Asset Management at a 5.3 per cent position.
The Troy Asset Management Spectrum fund has lagged the MSCI World index over the past year, returning a 1.2 per cent loss compared with a 0.5 per cent gain for the index. However, it has outperformed the IA Flexible Investment sector’s loss of 4.3 per cent over that time. The past six months have seen the fund sustain a 2.5 per cent loss, just behind the index’s 1.9 per cent return.