With between 25 and 30 names included, it remains a fairly concentrated portfolio, but it has, she said, a good five to 10 more than when it started.
Cash weightings are also significantly higher than three years ago. Currently Walker says she is holding between 5% and 8% in cash – on a look through basis to the underlying funds, that number is closer to 10% to 15% – substantially more than the 0.5% she held at launch.
Both the cash level and the number of holdings in the portfolio reflect a lack of conviction on Walker’s part, she said as valuations remain high in most areas of the market. And, there remains the possibility of a black swan event that could disrupt the fragile recovery underway.
“A lot of managers deployed their cash following the ‘resolution’ of the Greek crisis. I didn’t, I still have my cash because I still don’t have that confidence that we are out of the woods. The black swan event is something like another 2008 environment and, at the moment central banks have very few tools in the box to deal with that.”
On the topic of central banks, Walker believes that central banks remain most keen on avoiding deflation and, while we are beginning to see wage growth pick up, she does not believe yet that it is sufficient to see all of the new liquidity removed from markets.
Indeed, she said, the financial repression that has taken place since the financial crisis, the massive money printing experiment that has been undertaken by governments that has forced yields down and investors into ever riskier assets, poses a challenge to value investors.
“The most important thing is to be conscious that although there is relative opportunity (right now we have a mild overweight to equities which has both helped and hindered in the past few years ) if you look at equities in aggregate they are expensive in absolute returns,” she said.
That is not to say there are not pockets of opportunity. Indeed, one of Walkers strongest views is in Japan which she says still offers significant opportunity, but they are fewer and farther between.
It is largely for this reason that the funds hold more names than in previous years. “When valuations are more difficult to judge, the number of holdings rise. I don’t have as much conviction as I have in the past and so it is natural to spread my risk.”
