Evelyn Partners Active MPS team re-balance models as range marks 10th anniversary

Over 10 years, all six models in the Active MPS range have outperformed their benchmarks*. By way of example, the Balanced Growth model has generated a return of 121.65% over the past decade against the Composite Benchmark 6 TR returning 100.75% over the same period.

Evelyn Partners’ six risk-mapped Active MPS portfolios are actively managed and built using a range of investment tools including open-ended funds, investment companies and passives. The portfolios are available through investment platforms such as abrdn (Wrap), Aviva, M&G Wealth Platform (Ascentric), Novia, Quilter, Transact and 7IM.

The team made the following changes to three of its models in the latest re-balance (new weightings listed next to individual holdings below):

Defensive

In the Defensive model, the team have increased exposure to gilts, UK corporate bonds and overseas bonds (hedged to sterling). This was funded by reducing cash and dollar denominated investment grade bonds. Here, the team took advantage of the sell-off in credit that has created attractive yields and banking some of the benefit of the dollar’s strength against sterling this year. Bond duration remains short.

• Reduce cash 2%
• Reduce iShares USD Corporate Bond 1.5%
• Increase iShares UK Gilts 0-5 Years 1%
• Increase Artemis Corporate Bond 1%
• Increase AXA US Short Duration High Yield (hedged class) 1%
• Increase Sequoia Economic Infrastructure Income 0.5%

The team also introduced a new position in the Fulcrum Diversified Absolute Return fund for diversification purposes. They have trimmed BH Macro which has risen by over 30% YTD and which continues to trade at a hefty premium to net asset value**. It also comes with a sizeable ongoing charges figure (OCF) so this switch, at the margin, will reduce its portfolio costs. NB Uncorrelated Strategies was trimmed to help fund the Fulcrum position (the team has no issues with its performance this year with a rise of over 12%***).

• Reduce BH Macro 0.5%
• Reduce NB Uncorrelated Strategies 1.5%
• Initiate Fulcrum Diversified Absolute Return 2%

Finally, the team took the opportunity to switch its long-standing position in the passive Vanguard US Equity Index fund (to a weighting of just over 5%) to the cheaper super institutional class that Evelyn Partners was recently granted access to. This comes with an OCF of 0.06%, compared to the team’s existing position of 0.10%.

Defensive Income

The rationale for making changes in Defensive Income was the same as Defensive, but with slightly different weights and a small net increase in allocation to hedge funds. The Vanguard US Equity Index fund switch was also carried out (to just over 7% weighting).

• Reduce cash 1.25%
• Reduce iShares USD Corporate Bond 0.75%
• Increase iShares UK Gilts 0-5 Years 0.25%
• Increase Artemis Corporate Bond 0.75%
• Increase AXA US Short Duration High Yield (hedged class) 0.5%
• Increase Sequoia Economic Infrastructure Income 0.25%

• Reduce BH Macro 0.25%
• Reduce NB Uncorrelated Strategies 1%
• Initiate Fulcrum Diversified Absolute Return 1.5%

Balanced Income

The team increased UK corporate and overseas (hedged to sterling) bonds in the Balanced Income model. This was funded by reducing cash and dollar denominated Emerging Market bonds. Here the team took advantage of the sell-off in credit that looks to be offering better returns at present and banking some of the benefit of the dollar’s strength against sterling YTD****. As with in-house guidance, its bond duration remains short.

• Reduce cash 1%
• Reduce M&G Emerging Markets Bond 0.5%
• Increase Artemis Corporate Bond 1%
• Increase AXA US Short Duration High Yield (hedged class) 0.5%

The team made one small shift in the equity pot where they wanted to bring the UK allocation closer to equal weight to reflect its current positive outlook for large cap UK stocks (defensive and cheap).  This was funded by a reduction in US equities that, for sterling investors, have been saved performance wise this year by the dollar’s strength.

• Reduce Vanguard US Equity Index 0.5%
• Increase L&G UK 100 Index Trust 0.5%

As with Defensive and Defensive Income, the team switched share classes in the Vanguard US Equity Index fund to the cheaper super institutional class (to just over 10.25% weighting following the reduction in size).

James Burns, lead manager of the Evelyn Partners Active MPS commented:

“By using a range of investment tools including open-ended funds, investment companies and passives, our Active MPS benefits from diversification by asset class and product type. The structure has given the team the flexibility to respond to changing market conditions over the past 10 years and we are delighted with the resultant outperformance of our Active MPS range, which has benefitted the financial advisers who use our service and their clients.

“The changes announced in the latest re-balance, although not huge in quantum, convey a strong message that some dry powder is being deployed into areas of the fixed income market that are for the first time in years, and following a pretty savage sell-off, are looking pretty attractive.”

ENDS

Past performance is not a guide to future performance.

**source: Refinitiv

***source: Morningstar

****source: Evelyn Partners