Smith & Williamson MPS reduces Europe and Asia equity exposure ahead of New Year

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Published: 20 Dec 2021 Updated: 20 Dec 2021

Smith & Williamson Investment Management’s Managed Portfolio Service has reduced its overweight to European and Asian equities as it positions its range for the New Year.

The team has reduced its exposure to Europe and Asia in its medium risk models but remains overweight equities across the board, believing the asset class continues to offer strong return potential for the foreseeable future.

“We have been overweight equities since almost the first day of the service,” said James Burns, co-manager of the Smith & Williamson Investment Management’s MPS. “The current environment isn’t the best time to be making particularly big calls but we were conscious some equity overweights had perhaps got a bit too high in the medium models, and it was time to rebalance them.”

Partly this has been achieved by a reduction in allocation to the Schroder Asia Total Return Investment Company, although the team remains happy to hold it. “The investment company will remain a core position for us across the range, we simply felt the need to ensure it was not too big a position on an individual level.”

Elsewhere, the team has reduced its underweight to corporate bonds at the lower end of the risk models and changed its fund exposure to inflation-linked bonds.

“With inflation remaining at its current elevated levels, we have reviewed our positioning and made the decision to sell out of the ASI Global Inflation-Linked Bond Fund and replace it with the Sanlam Global Inflation-Linked Bond Fund.

“The Sanlam fund, run by a manager we know well in Tom Wells, presents an interesting proposition. It has virtually identical exposure to the Aberdeen fund, however it is a much smaller, nimbler fund. It has a larger weight into Europe than the Aberdeen fund, and brings with it a reduced cost base – it has an OCF of just 0.27%.”

The move comes following the team’s switch into the cheapest share classes in some of its UK fund holdings, which Burns says has been made possible by the increased scale created by the merger between Smith & Williamson and Tilney in September 2020.

“Since the merger we have been able to access cheaper share classes to the benefit of our clients,” he says. “As a result of the advantageous position we’re now in, we have switched Ninety One UK Alpha (which is held across all models) and the RWC UK Equity Income Fund (held in the top two models) into the cheaper share classes available for actively managed funds.

“Now every fund we hold across the models is in the cheapest share class we can access. Although there might be more to move down the line, we feel that we will begin the year in a very good place.”


This release was previously published on Tilney Smith & Williamson prior to the launch of Evelyn Partners.