Updated each month, the discussion documents help Wellian to chart over time who likes what and why. For example, how negative voters are on the UK.
“You can see the trend,” he says. “Six months ago we were 40% UK, someone is now 30% and someone else is 15%.”
But, he adds, being positive or negative does not equate to going overweight or underweight. There are other factors that come into play. “It is also important to look at where the clients’ banks are,” he says. “And ask if we are meeting the objectives of the portfolio from a volatility perspective or broader factors.
“Our portfolio turnover is relatively low. We don’t want to second guess what managers are doing. If you’re buying a global fund for instance, the manager might be massively overweight emerging markets this month and overweight Japan the next.”
Instead, Wellian goes for consistent, longer-term managers with a reliable process. Philbin says: “Our allocation only changes as we get more confident or less confident on particular markets.”
According to Mayo, all the portfolios are diversified by sector, allocation, country and region. Some of them have more fixed income and a lower element of equity, or vice versa.
Digging deep
Following a deep dive into the portfolios, the firm has consolidated its holdings over the past couple of months, reducing both its equity holdings and the UK, says Mayo.
Instead, it has been increasing its exposure to Europe and global equities, as well as fixed income and alternatives.
During the deep dive, Wellian also discovered a high level of correlation between its portfolios, which meant they failed to offer the level of diversification required.
“What we’ve been doing is tidying the portfolios up, increasing exposure to international holdings, while reducing it to the UK,” says Philbin.
The exposure to the UK has previously been very high, according to Philbin, so it has been beneficial to diversify further into international markets.
Within the conservative portfolios there is no exposure to emerging markets, Japan or Asia because “there just isn’t that risk budget available”.
Wellian is, however, starting to become more positive on Asia and emerging market equities as an asset class. But, says Philbin, the firm gets exposure to international markets by buying global funds, which he believes is what sets Wellian apart from its peer group.
“We will buy global funds and allow third-party managers to make asset allocation decisions on our behalf, because ultimately we’re building portfolios with a risk budget in mind, and if we believe these managers can add value, then we are all for it.”
