Evelyn Partners Core MPS team favours country and sector specific funds in latest re-balance

In its latest re-balance of portfolios, the Evelyn Partners Core Managed Portfolio Service (MPS) team has reduced exposure to global equity funds in preference for country or sector specific funds. It comes as recent changes have reduced OCFs by 16 basis points on average across the range, equivalent to a 27% cost reduction.

The re-balance has seen the Fundsmith Equity, Brown Advisory Global Leaders and Fidelity Emerging Markets funds fully exited, with the global proceeds split across geographies to reflect house asset allocation views.

The team has added to existing positions in funds including Baillie Gifford Japanese Fund, Stewart Investors Asia Pacific Sustainability Leaders and iShares Core FTSE 100. New positions include Premier Miton UK Multi Cap Income and Federated Hermes Global Emerging Markets, as well as Ninety One UK Alpha, which has been a key holding in the’ Active MPS range for a number of years.  

In addition to the removal of a number of global equity funds, a position in Liontrust Special Situations, a UK equity fund with significant smaller companies and mid-cap  exposure, was also exited.

While reducing overall exposure to global equity funds, which typically have a majority of their exposure to US equities, the team has retained its holdings in iShares Edge MSCI World Quality Factor ETF in the Defensive Model and the TM Evenlode Global Income fund in the two income models.

Meanwhile, changes have also been made to the team’s Absolute Return holdings. Janus Henderson UK Absolute Return and Trojan Fund have both been exited, and NB Uncorrelated Strategies and Fulcrum Diversified Absolute Return have been introduced.

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

“By using country specific funds we are able to closer reflect our in-house tactical asset allocation guidance which is cautious on US equities. Interestingly, the global funds exited were also some of our more expensive ones and replacing them has helped bring down the overall OCFs in the models, alongside the addition of three additional passive funds."

Commenting on the Absolute Return moves James Burns added:

“Janus Henderson UK Absolute Return and the Trojan Fund are perfectly good funds but are essentially net long equity and so may not protect capital as well as other options if there is a prolonged period of market declines. I am not looking for the allocation to Absolute Return exposure to shoot the lights out, but I do want it to offer diversification at a time when the outlook for both equities and bonds is a little uncertain. Both NB and Fulcrum have proved their credentials this year and if they can provide mid-single digit returns each year for the next few years, I believe they will have fully justified their position in the models.”

The Core models also now feature nine exchange traded funds, for improved costs. Three new passive funds have been added to the models; Vanguard US Equity (OCF 6bps), Vanguard FTSE Developed Europe ex UK (OCF 10bps) and HSBC MSCI AC Far East ex Japan (OCF 45bps).

Burns commented: “It’s worth highlighting Vanguard US Equity where we have recently been given access to this very cheap share class. This demonstrates one of the benefits of the Smith & Williamson / Tilney merger, which created Evelyn Partners, in that our purchasing power is getting us access to certain classes that not everyone else can and this is a direct benefit for financial advisers and their clients who choose us as their investment manager. This can also be seen with Ninety One UK Alpha where last year we were given access to the K class that comes with an OCF of just 48bps, which is very low cost for an actively managed equity fund.”

“While the latest changes were driven by investment views, the combined impact of removing some of the higher fee global funds, introducing three additional passive funds and our strengthened buying power has had a significant effect in term of reducing ongoing costs. Since May, ongoing costs on the portfolios have reduced by 27% in total, with the average OCF falling from 0.58% to 0.42%.”