Artemis, Polar Capital, Columbia Threadneedle and Stageline have all benefitted on the back of 7IM’s belief that active managers are due a period of outperformance as central bank policy returns to normal following a flood of money into passive and large caps, driven by quantitative easing.
It believes that despite the ongoing bull market, many of the defensive growth stocks targeted in the hunt for yield in a low interest rate environment have limited growth capacity because much of the easy money has been made.
Tony Lawrence, investment manager at 7IM, said: “Our decision to trim our active manager exposure in 2016, a particularly tough time for active managers, has proved a good call over the last couple of years.
“But conditions now merit more active positioning, so we have been cutting our passive exposure – for example by selling FTSE 100 futures.”
Changes
7IM has added a significant number of active managers with a focus on the UK, Europe, Japan and US small caps, as well as frontier markets.
To target the UK, the Artemis UK Select fund has been added across the range, as has the Polar Capital UK Value Opportunities fund.
Elsewhere, the Threadneedle UK Extended Alpha fund has been added to the 7IM Moderately Cautious fund and the 7IM Balanced fund.
7IM has also sought to play certain themes across the range including strong franchises, recovery plays and “hidden gems”. As such, it has added the Stageline US Small Cap Value fund to the 7IM Moderately Adventurous fund and the 7IM Adventurous fund.
In Europe, the firm has added the SYZ European Selection and Miton European Opportunities funds across the multi-manager range.
To access frontier markets, Ashmore Emerging Markets Frontier Equity has been added to the 7IM Moderately Adventurous fund and the 7IM Adventurous funds.
For Japan, 7IM added Baillie Gifford Japanese Smaller Companies several months ago to the Balanced, Moderately Adventurous and Adventurous funds.
From April 2016 to present, 7IM has increased the active weighting in the 7IM Moderately Cautious fund from 35% to 48%; from 38% to 60% in the 7IM Balanced fund; from 52% to 63% in the 7IM Moderately Adventurous fund; and from 56% to 79% in the 7IM Adventurous fund.
Damian Barry, senior investment manager at 7IM, said: “It may appear counter intuitive to increase active exposure at a time when the bull market is approaching its tenth year and much of the ‘easy money’ may have been made.
“But as the market becomes more discerning, with valuations increasingly stretched, that’s entirely our logic. We have been looking for managers who can seek out value opportunities, in under researched, overlooked corners of the market.”
