20 November 2024
The Quilter Investors Monthly Income and Monthly Income & Growth portfolios have introduced a number of new asset classes to the range following an optimisation of its strategic asset allocation.
Portfolio managers Helen Bradshaw and CJ Cowan have introduced local currency emerging market debt as an asset class within the fixed income portion of the portfolios. This provides the portfolio with another income stream and a diversified driver of returns. The emerging market debt exposure will stand at 1.25% in the Monthly Income portfolio and 0.75% in the Monthly Income & Growth portfolio.
To get this exposure the portfolios have invested in the L&G Emerging Markets Government Bond (Local Currency) Index Fund.
Also, within fixed income, and aligned with the WealthSelect and Cirilium portfolios, the SAA of the Monthly Income range has broadened out its fixed income exposure by breaking it down into four component parts rather than using a single broad fixed income index. This gives the optimisation process more freedom to vary the weighting between UK and global corporate and government bonds to help take advantage of opportunities within this asset class.
To reflect these changes the portfolios have introduced the Premier Miton Corporate Bond Monthly Income fund and the Vanguard EUR Government Bond ETF.
Within the alternatives part of the portfolios, the team has introduced hedge funds as an asset class within the asset allocation model, to replace UK property, although this is more a procedural change than one that has practical implications for fund positioning as property funds have not been held by the portfolios for several years. Additionally, the Ardea Global Alpha fund has been added to the portfolios given its ability to provide diversification as well as its income profile.
Bradshaw and Cowan have also reduced the exposure to high yield bonds as spreads have tightened of late. They have also been switching out of smart beta ETF holdings due to the mid-cap value tilt these came with, choosing instead to invest in broad market passives and make up for lost income elsewhere in the portfolio. The BNY US Equity Income fund has also been added to the portfolios as a way to target companies outside of the large mega cap tech names and to introduce a discretionary active manager to the US lineup.
Helen Bradshaw, portfolio manager at Quilter Investors, said: “As markets change and adapt, we too want to ensure the Monthly Income portfolios are optimised to their full potential, giving diversified returns and income streams to advisers and their clients. The income space is becoming a really interesting part of the investing world with innovative approaches being taken across asset classes.
“We continue to seek ways to give our investors the opportunity to access asset classes and funds that would perhaps be out of reach or where research is not as widely available outside of a multi-asset portfolio structure. As such, we are excited to see what our new emerging market debt and hedge fund exposure can bring to the return and income profile of the portfolios.”
CJ Cowan, portfolio manager at Quilter Investors added: “We have also taken this realignment of our strategic asset allocation as an opportunity to resize existing exposures and introduce some interesting new holdings.
“Given where markets sit currently, we wanted to increase the defensiveness of the portfolios. The value and small cap tilt in the range has been moderated in favour of larger cap holdings but there is still a bias there, as you would expect in an income fund. We believe this provides a more balanced portfolio that should perform well in a wider variety of market conditions while offering similarly attractive yields.”
