The team at Evelyn Partners has announced their latest portfolio rebalance and Asset Allocator was on hand to receive it.
Back in December, James Burns and co increased their portfolios’ exposure to cash for the first time, owing to the higher returns which money market funds had begun to generate.
This time around, the focus is on US equities.
Burns, lead manager of the Evelyn Partners Core MPS, is broadening out their American exposure as he sees a relatively stable macro-economic outlook and a resilient earnings story across the pond.
“There is a huge amount of market noise at the moment around the AI boom, and the surging ‘Magnificent Seven’ stocks that are driving US and even global indices higher,” he said.
“With positions already benefiting from this trend, we believe there is value in seeking exposure to other areas of the US stock market where gains could broaden out from big tech.”
This means Burns has opened a position in Premier Miton US Opportunities in his three highest risk portfolios. It also meant increasing exposure to BNY Mellon US Equity Income and GQG US Equity.
Burns said: "BNY Mellon, with a significant allocation to financials and healthcare should benefit from the rally in US equities broadening out whilst GQG takes a very focused and unconstrained approach and offers something very different to the broader market.
"Premier Miton US provides meaningful exposure to mid and small cap companies and the managers’ valuation discipline steers them away from mega cap tech stocks."
Premier Miton US Opportunities is gathering steam among our allocators: it is held by six allocators in our database and is the most popular active US fund to steer mostly clear of the large-caps.
The fund is £1.45bn in size and has had a mixed time of late, delivering bottom-quartile returns over one year and third-quartile returns over three and five. Naturally, minimal exposure to the Magnificent Seven has dragged on performance, but sometimes underperformance is worth it for avoiding the concentration risks of Big Tech focused US funds.
We recently chatted with Abrdn's Jason Day, who explained how he avoids concentration risk among the largest US stocks by seeking value further down the market cap chain.
Evelyn’s rebalance in favour of the States was funded by a reduction primarily in UK equities, and, to a lesser extent, European equities.
Burns cut his Lindsell Train UK Equity exposure across all risk profiles. This fund has been in the wars of late: three years of underperformance has seen Nick Train’s flagship fund fall from £6.2bn AUM to £3.9bn today. We covered the extent of DFMs’ restiveness with this fund recently, which you can read about here.
In a different vein, Evelyn sold out of Ninety One Diversified Income as they did not feel it was providing the required diversification benefits, with Atlantic House Defined Returns taking its place.
For many allocators, the pull of diversification among alternatives is essential to justify its inclusion within portfolios at all. If you’re after a long read about alts, you can find Asset Allocator’s analysis here.
Despite the tweaks, the team points out that the balance between equity, fixed income and alternative assets within each model of their portfolios has remained static.
