Seven Investment Management (7IM) has announced several changes to its model portfolio service (MPS) following its latest quarterly review.
The firm has four MPS offerings, consisting of the responsible choice, active, blended, and passive ranges.
Among the changes, 7IM has added to AT1 bonds across its higher risk profiles. The firm said: “With the move up in rates, AT1s are now yielding around 12%, we think it is appropriate to scale up our allocation in higher risk portfolios as these yields make them an appropriate equity replacement.”
7IM has also brought two Vanguard index funds to its range. The Vanguard Emerging Markets Stock Index Fund has been introduced to the passive and blended models as the “new preferred vehicle for accessing the equity of emerging market companies”.
The Vanguard FTSE 100 Index Unit Trust has been introduced to the blended range as part of a tactical shift away from its FTSE All-Share allocation. 7IM investment analyst Salim Jaffar said the tilt gives the range “more exposure to cheaper large-cap stocks in sectors we like: energy, materials and healthcare”.
Fidelity’s UK Select Fund has been added into the active range. Jaffar said: “This fund runs with a slight quality growth style and aims to own good businesses over the long term. We believe that the experience of the portfolio manager – Aruna Karunathilake – and the deep analyst resource base at Fidelity will serve the fund well going forward as well as adding some diversification to our UK sector portfolio in the active models.”
Looking ahead, Jaffar added: “Understandably, investors are starting to worry about what’s next for financial markets. However, economic data isn’t likely to stabilise until next year, so ‘sideways with volatility’ is the most likely scenario for the next few months.
“Going forward, we believe four key factors will be at play: one, a global manufacturing downturn is unavoidable, but the service sector should be resilient. Two, inflation will fall eventually, but the short-term outlook is less clear. Three, central bankers will remain under pressure, so the interest rate outlook will change frequently. Four, corporate profit margins have peaked, but most companies will keep growing earnings. As ever, being consistent and not reacting to uncertainty is key.”
7IM MPS quarterly changes
|MPS Range||Funds added|
|Responsible choice||Ishares ESG Overseas Corporate Bond Fund|
|Active||Fidelity UK Select Fund|
|Blended||Vanguard FTSE 100 Index Unit Trust, Vanguard Emerging Markets Stock Index Fund, Candriam Market Neutral Index Arbitrage Fund|
|Passive||Vanguard Emerging Markets Stock Index Fund|
See also: Caledonia looking to sell 7IM for £400m