Standard Life Investments’ Bambos Hambi prefers the outlook for Europe over emerging markets in his MyFolio Multi-Manager suite, and will add to Europe further if it continues to underperform.
Hambi says he prefers the developed markets over Asian emerging markets, in particular those that are currently easing policy.
He says: “We are overweight Europe and Japan equities. We have been buying into European mid caps over the last 18 months and added more in December when we had a setback.”
Within the £661m MyFolio Multi-Manager III fund – which sits in the middle of the five-strong risk-targeted suite – the exposure to Europe has been increased from 3.5 per cent to 6.5 per cent. Hambi says he will increase the allocation further “if Europe continues to underperform”.
The core holding in the Europe allocation is the £318m Artemis European Opportunities fund at 3.3 per cent. Run by Laurent Millet, Hambi says the stockpicking fund has a marginal bias to growth and an experienced manager. “It has done very well for us,” Hambi says. “It is probably top decile.”
In December Hambi also added the recently-launched Mirabaud Equity European Ex UK Small and Mid cap fund, a 1.3 per cent position. The fund is run by Ken Nicholson, who Hambi says is “willing to wear out his shoe leather looking for opportunities”.
Japan equities comprise 3.5 per cent of the fund. Hambi says he has built and maintained this allocation “for some time”, although he reduced the weighting in December to reinvest in Europe. There are two Japanese equity funds: Schroder Tokyo and Morant Wright Nippon Yield, both 1.75 per cent positions.
“We have had these two funds for a long time,” Hambi says. “In Japan value works well, and both funds have a value bias. Morant have an experienced team of managers in the UK while Schroders has analysts in Tokyo. They have a lot of grey hairs and experience.”
The boost to European equities across the range has also been funded by reducing the funds’ exposure to Asian emerging markets. For example, in the MyFolio Multi-Manager III fund Hambi has sold out of the Mirae Asset Asia Sector Leader Equity fund, a 0.75 per cent position.
Hambi says: “We are underweight Asian equities, emerging market equities, UK equities and US equities. Effectively we believe uncertainties are building and we expect more volatility, moderating growth.
“We see a slowdown in China, Brazil and Russia. We are concerned with the credibility of China’s policy makers and we are concerned with the scale and timing of the UK and US rate rises.”
Hambi has also reinvested index-linked gilts he bought towards the end of last year, which represented 3 per cent of the fund, putting the money to work in Europe.
Hambi joined SLI in June 2011 as head of fund of funds management. He heads up the MyFolio range in which there are 25 multi-asset funds, including passive funds of funds, and both fettered and unfettered funds of funds. Within the latter there are 10 risk-rated multi-manager funds, split between income and growth.
“The funds now have a five-and-a-half-year track record, which is good. They are catching people’s attention,” Hambi says.
Indeed, the MyFolio range saw £1.85bn of net inflows last year and is on course to see similar this year, which Hambi says makes them “one of the fastest-growing fund managers out there”. In total the range has £8bn in assets under management.
There are four stages to the funds’ investment strategy. First, the strategy committee considers the long-term strategic framework with input from Moody’s Analytics. There are eight members of the committee, including Hambi.
Second, the 40-strong multi-asset investment team considers how to add value over short-term timeframes. With this short-term tactical allocation the team is looking to add 35 to 50 basis points per annum in added value.
Third is the fund selection, delivered by Hambi’s team of 11, “one of the largest on the UK fund of funds retail side”, Hambi says. Finally three dedicated dealers tend to the dealing and rebalancing.
While the number of holdings varies between the funds, the MyFolio Multi-Manager III fund typically has around 25, with an annual turnover of 20 per cent.
Over the past year the MyFolio Multi-Manager III fund has fallen 2.48 per cent, according to FE.
Bambos Hambi is head of fund of funds management at Standard Life Investments