Smith & Williamson Investment Management rebalances portfolios as it looks ahead to opportunities in ‘cheap and unloved’ UK

Smith & Williamson Investment Management has undergone a re-balance of its core range of managed portfolios, removing Liontrust Special Situations from five of its models as it rebalances its core portfolio range.

Liontrust Special Situations was sold despite having performed “relatively well” since it was added to the core range of model portfolios in December 2019.

“Our decision to reallocate is mainly down to wanting to focus our list of UK equity funds,” said James Burns, co-head of Smith & Williamson Investment Management’s Managed Portfolio Service. 

The proceeds have been reinvested in several existing positions, such as NinetyOne UK Alpha, Blackrock Smaller Companies and Miton Multi Cap Income.

While it has exited the UK focused Special Situations fund, the team said the UK overall was ‘cheap and unloved’.

“Several of our holdings in the US, Japan and Asia have done well this year, in some cases spectacularly so. JPMorgan Japan has performed very well for us, for example,” said Burns.

“But certain risks on the horizon have led us to cash in part of those positions and rethink how capital is allocated.

“We have not increased our exposure to the UK despite it being cheap and unloved. All of our  portfolios remain  underweight for the time being, although we feel that there may be an opportunity later in the year to address this, as the direction of travel over Brexit becomes clearer.

“However, our Growth portfolio’s previous significant underweight to the UK has been partially neutralised.”

Alongside the sale of Liontrust Special Situations, the group’s higher risk portfolios have also reduced exposure to JPM Japan, Vanguard US Equity Index and Schroder Asian Alpha Plus. 

In terms of additions, other funds which the team chose to move assets into in the Growth strategy, included Artemis UK Select and Man GLG Undervalued Assets.

The portfolios have also been moved to reduce the cost of their fixed-interest exposure amid a world of tumbling interest rates. This saw BlackRock’s Corporate Bond fund sold, with three quarters of the proceeds allocated to the “cheaper” Artemis Corporate Bond fund.

The rest was invested into either Liontrust Monthly income or Royal London Corporate Bond, or a combination of both, depending on the portfolio.

Burns said: “Overall, we are conscious that having held firm on our pro-equity stance until now, there are more clouds of uncertainty on the horizon. This is primarily amid concerns over the US election and the ongoing global coronavirus crisis.

“As such, it was prudent to reduce our equity exposure in our portfolio models where it was getting to be sizeably overweight in equities. We have also looked to reduce portfolio costs in our fixed income allocation.

“However, we still remain overweight equities in all models, ranging from 0.1% to 2% overweight.”