20 September 2023
Quilter Cheviot has implemented a number of new ideas to its Managed Portfolio Service (MPS) as it seeks to take advantage of key conviction themes at a time when markets remain uncertain.
While portfolio managers Simon Doherty and Antony Webb have left headline asset allocations unchanged in recent months, they have introduced several positions to the holdings in the ‘Building Block’ funds used to construct their MPS strategies.
This activity has led to the introduction of Equinix, the largest publicly-listed data centre company in the world. Well-positioned within a market experiencing structural undersupply, Equinix is a high-quality operator providing exposure to the growing demand for data centre space arising from streaming content, cloud computing, 5G networks and artificial intelligence (AI).
Doherty and Webb also recently reintroduced adidas to the portfolios within the service’s European equity allocation, a position that had originally been sold last year. The team sees a turnaround in the corporate strategy following the appointment of a new CEO, coupled with a growing interest in the company’s suite of products, as catalysts for sales and margins to positively surprise the market.
Elsewhere, in the UK the team has exited its residual position in Taylor Wimpey and added to RELX, a move that further increases the defensiveness of the strategies’ domestic equity exposure as the economic data continues to paint a mixed picture.
Managed by Simon Doherty and Antony Webb, Quilter Cheviot’s MPS utilises a unique Building Blocks structure – a range of funds designed and actively managed by Quilter Cheviot exclusively for use within its MPS.
Each Building Block fund is designed to provide specific geographic or asset class exposure, and invests in a combination of direct equities, bonds or external fund holdings. The service provides clients with a solution that is nimble in its ability to effect change, and more granular in its ability to reflect themes than a ‘traditional’ MPS funds-based approach.
Simon Doherty, Head of Managed Portfolio Services, said: “We are in a strange period for markets just now. Economies have held up surprisingly well to the swift increase in interest rates, and developed equity markets have broadly remained robust. However, some warning indicators are flashing and as such it feels sensible to be cautious and tread carefully when deciding on exposures.
“As such, we see stock selection as the best way to add value for clients just now, identifying those best in breed companies that we think will thrive regardless of the external environment. Within our structure we can make swiftly adjustments without having to initiate new fund holdings or a service-wide rebalance, and continue to identify opportunities that we can take advantage of now.
“AI has clearly been much discussed as a theme. We think Equinix has the capability to be a real winner here as demand for data centres grows, although this is far from the only driver of growth for the company: increasing demand from streaming, cloud computing and 5G networks ensure it is anything but a pure AI ‘play’.
“We also see opportunities in some of those fallen giants who have had a tough time due to events of their own making. We see Adidas at the start of an exciting multi-year turnaround story, operating in an industry (sportswear) that remains attractive and growing.
“At the same time, we remain cognisant of the uncertain environment and as such wanted to bolster our portfolios’ defensive characteristics within the UK. Companies such as RELX can provide just that, with its analytics and tools remaining incredibly popular even as businesses cut back their own spending.”
