17 January 2024
Quilter Cheviot has introduced a new holding to its Managed Portfolio Service (MPS), while adjusting its exposure within US technology stocks as it seeks to take advantage of buying opportunities.
At the beginning of the fourth quarter, portfolio managers Simon Doherty and Antony Webb selectively added to bond allocations, reducing the UK equity exposure and adding to the US, moves which have proven beneficial in the short-term. Now, following a strong period for markets, the pair have made some changes at the stock level within the ‘Building Block’ funds used to construct the MPS strategies.
DSV, the third largest freight forwarder in the world, has been added to the Quilter Cheviot European Equity Fund within the strategies, with Doherty and Webb seeing recent share price weakness as a buying opportunity. The company, based in Denmark, possesses best-in-class technology, a strong track record of capital allocation and a culture of entrepreneurialism.
Elsewhere in the strategies, some modest adjustments were made to the technology sector exposure, with Microsoft and Nvidia being added to at the expense of Apple – a reflection of current preferences. This moves Microsoft to a slightly larger overweight position within the strategies, with Nvidia still a marginal underweight and Apple a couple of percentage points below its index weighting given recent underwhelming news flow on the stock.
Doherty and Webb have also added to the position in ING, the Dutch bank, funded by the trimming of a position in BNP Paribas, which remains a core holding. The managers like ING’s focus on digital innovation and its shareholder-friendly capital commitments.
Recent performance across risk levels has been positive, while over the long-term, its highest equity weighted strategy, Global Growth, is the best performing managed portfolio in the market over ten years according to Defaqto.
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.
Antony Webb, deputy head of managed portfolio services at Quilter Cheviot, said: “2023 was a better year for investors than many expected given the state of the global economy. We have been in a scenario where there has been a gradual realisation of pessimistic expectations failing to materialise, meaning that the mere avoidance of overtly negative scenarios has been cheered by investors.
“This does not mean all is rosy in stock markets, despite recent surges. Restrictive monetary policy will be eased but unlikely to the extent that the market is anticipating and thus this leaves room for disappointment. Even with easing, central banks have created an environment where growth will be challenged and thus when the switch to rate cuts happens will be keenly watched.
“It is important, therefore, for the portfolios to reflect the current environment we are facing. We already increased our allocations to fixed income earlier in the quarter on the basis that the worst is yet to pass, and now it is about ensuring we have the right companies for an uncertain future. DSV’s current valuation is looking increasingly attractive for what we perceive to be a high-quality company generating strong free cashflow. We have also made some tweaks to our US tech exposure, highlighting the ability we have to be really targeted in this space and have the portfolios keep up with recent developments.
“There are many risks on the horizon in 2024, and as such the portfolios need to be prepared for any shock that may arise, whether it be known or unknown. We are in somewhat of a sweet spot for markets right now, but it won’t take a lot to derail that and as such cautious optimism feels like a prudent approach.”
