Evelyn Partners significantly increased its exposure to fixed-income assets in the latest rebalancing of its model portfolio service, MPS Core, with the changes being funded by cutting back on equities and alternative assets.
Managing partner James Burns (pictured) said the attraction of fixed-income yields motivated the changes, as significant weight was added to both corporate and government debt funds.
The MPS team added to a mixture of shorter-dated UK corporate bonds, longer-dated US government bonds, and US government inflation-linked bonds, both hedged to sterling. Burns argued that the mix leaves the models well-placed to take advantage of falling inflation in the short term, while also providing protection should longer-term inflation prove more persistent.
The Vanguard US Government Bond Index, hedged to sterling, was supplemented across the income, balanced, cautious, conservative, and defensive models, and Evelyn opened a stake in the fund in the growth and adventurous portfolios. The three most defensive models also upped their exposure to the Artemis Corporate Bond fund.
NB Uncorrelated Strategies was a favourite across the models as a diversification tool.
When it came to equities, Evelyn reduced its exposure to high-quality US companies, citing the easing of recessionary risks, adding instead to the Vanguard US Equity Index across the majority of models.
UK large-cap equities were also trimmed across the majority of models, with the outperformance of sectors such as energy, commodities, and financials influencing the decision.
Weightings in the JP Morgan Global Macro Opportunities fund were cut across all eight models, with the report highlighting that the fund demonstrated a higher correlation to risk assets compared to its peers. The adventurous and income strategies sold out of the strategy completely.
Burns added: “We still believe that equities have further to run this year but felt it was sensible to take some money off the table following the strong recovery almost all markets have enjoyed over the past couple of months.
“Absolute return funds still have a significant role to play in diversified portfolios, but in the current environment they may struggle to repeat their performance of the past couple of years.”
Evelyn Partners – MPS Core
| Model | Increased weighting | Decreased weighting |
|---|---|---|
| Core Defensive | NB Uncorrelated Strategies 0.5% Vanguard US Government Bond Index (H) 2.5% M&G UK Inflation Linked Corporate Bond 0.5% Artemis Corporate Bond 1% Vontobel Twenty Four Absolute Return Credit 0.5% | L&G UK 100 Index Trust 0.75% iShares Edge MSCI USA Quality Factor ETF 0.75% JPMorgan Global Macro Opportunities 1.5% Cash 2% |
| Core Conservative | Fulcrum Diversified Absolute Return 0.5% NB Uncorrelated Strategies 0.5% Lyxor US TIPS ETF (H) 0.5% Vanguard US Government Bond Index (H) 1.75% L&G Short Dated £ Corporate Bond 0.5% M&G UK Inflation Linked Corporate Bond 0.5% Artemis Corporate Bond 0.5% Vontobel Twenty Four Absolute Return Credit 0.5% | L&G UK 100 Index Trust 0.5% NinetyOne UK Alpha 0.5% iShares Edge MSCI USA Quality Factor ETF 0.45% JP Morgan Global Macro Opportunities 2% Cash 1.8% |
| Core Cautious | NB Uncorrelated Strategies 0.5% Fulcrum Diversified Absolute Return 0.25% Lyxor US TIPS ETF (H) 0.5% Vanguard US Government Bond Index (H) 1.5% M&G UK Inflation Linked Corporate Bond 0.25% Artemis Corporate Bond 1% Vontobel Twenty Four Absolute Return Credit 0.5% Vanguard US Equity Index 0.5% Hermes Global Emerging Markets 0.5% | L&G UK 100 Index Trust 0.5% Lindsell Train UK Equity 0.5% NinetyOne UK Alpha 0.25% iShares Edge MSCI USA Quality Factor ETF 0.5% Stewart Investors Asia Pacific Leaders 0.5% Schroder Global Cities Real Estate 0.3% JP Morgan Global Macro Opportunities 1.5% Cash 1.45% |
| Core Balanced | Vanguard US Government Bond Index (H) 3.25% Vanguard US Equity Index 1% Hermes Global Emerging Markets 0.5% | L&G UK 100 Index Trust 0.25% iShares Edge MSCI USA Quality Factor ETF 1% Stewart Investors Asia Pacific Leaders 0.7% Schroder Global Cities Real Estate 0.75% JPMorgan Global Macro Opportunities 1% Cash 1.05% |
| Core Growth | NinetyOne UK Alpha 0.25% Vanguard US Equity Index 1% Vontobel Twenty Four Absolute Return Credit 0.75% Fidelity Asia 2% (initiated) Vanguard US Government Bond Index (H) 3.5% (initiated) | L&G UK 100 Index Trust 1.25% iShares Edge MSCI USA Quality Factor ETF 1.25% Stewart Investors Asia Pacific Leaders 2% Schroder Global Cities 0.5% JPMorgan Global Macro Opportunities 1% Lyxor US TIPS ETF (H) 0.5% L&G Short Dated £ Corporate Bond 1% |
| Core Adventurous | Vanguard US Equity Index 2% Fidelity Asia 0.75% Hermes Global Emerging Markets 0.75% Vontobel Twenty Four Absolute Return Credit 0.75% NB Uncorrelated Strategies 3.5% (initiated) Vanguard US Government Bond Index (H) 3% (initiated) | L&G UK 100 Index Trust 0.75% iShares Edge MSCI USA Quality Factor ETF 2% Stewart Investors Asia Pacific Leaders 1.5% Schroder Global Cities 0.75% |
| Core Maximum Growth | Fidelity Asia 1.5% Hermes Global Emerging Markets 0.25% NinetyOne UK Alpha 0.5% | L&G UK 100 Index Trust 0.5% Stewart Investors Asia Pacific Leaders 1.75% |
| Core Income | NB Uncorrelated Strategies 0.75% NinetyOne Diversified Income 1.5% Lyxor US TIPS ETF (H) 0.5% Vanguard US Government Bond Index (H) 1.5% Artemis Corporate Bond 1.5% L&G Short Dated £ Corporate Bond 1.75% Vontobel Twenty Four Absolute Return Credit 2% | L&G UK 100 Index 0.5% Threadneedle UK Equity Income 0.25% HSBC European Index Fund 0.25% Evenlode Global Income 0.5% Schroder Global Cities 1% JP Morgan Global Macro Opportunities 3.5% (exited) Janus Henderson Strategic Bond Fund 3.5% (exited) |
