Evelyn Partners Core MPS team has increased its exposure to government bonds while decreasing its allocation to corporate bonds and alternative assets, including absolute return funds and real assets.
The increase in government bonds will come through investments in Vanguard US Government Bond index and the CG Dollar fund.
James Burns, lead manager of Evelyn Partners Core MPS, said the increases are a result of beliefs that the peak of the interest rate cycle is nearing for developed markets, and provide a level of assurance for growth.
“Government bonds remain compelling for as well as offering attractive real yields they should also provide a level of portfolio insurance were a growth shock to occur,” Burns said. “Inflation-linked bonds also look interesting as we believe markets may be under-estimating medium-term inflation.”
Burns said the exposure the team continues to hold within corporate bonds will be mostly in short-dated bonds he expects will not be largely affected by downturns.
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“To make room for these moves we trimmed back the allocation to corporate bonds as credit spreads have continued to tighten to levels that their protection characteristics have become less obvious.”
The MPS team has also decided to make some changes to their equity exposure, increasing in the US market while decreasing in the UK. The increase in the US will introduce GQG US Equity, a large-cap US fund managed by QGG. The overall equity exposure will remain the same.
“Although at the index level US equities have been strong this year, this masks the fact that this has been driven by a handful of tech names which have benefitted from hype around artificial intelligence,” Burns said.
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“We see scope for this rally to broaden out and have added a new holding in GQG US Equity that should be well placed to capture this theme as well as complementing the existing positions.”
Evelyn Partners holds £54.9bn in assets as of June, with 28 offices across the UK. Paul Geddes was appointed CEO of the company this summer after Chris Woodhouse spent over five years in the role.
This article first appeared on Portfolio Adviser.
