Quilter Cheviot’s managed portfolio service has introduced an allocation in the Artemis US Smaller Companies fund within its MI Quilter Cheviot North American Equity fund.
The decision by managers Simon Doherty and Antony Webb follows a prolonged underweighting of the sector. However, Quilter said a possible fall in interest rates could boost opportunities for smaller companies and policy such as the Inflation Reduction Act could act as an additional benefit.
Quilter Cheviot also upped its exposure in Nvidia and Meta while reducing Alphabet and Mondelez. In its European Equity fund, the team increased exposure to banks and energy, while reducing consumer staples and real estate.
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“While interest rate cut expectations have certainly come down since the start of the year, the market is still looking at one or two cuts for this year before falling further next. As such, we feel it is prudent to begin adding to companies that we believe will have quite a strong reaction when these rate cuts arrive,” Webb said.
“Despite a period of sustained relative weakness versus large-caps, US small-caps look particularly well primed, with the US economy holding up well and a backdrop of very accommodative federal spending, regardless of who is in charge.
The MPS at Quilter Cheviot uses a ‘building block’ structure which is made of actively-managed funds designated to specific regions or asset classes and invested in equities, bonds, or external funds.
“The Artemis US Smaller Companies fund we have added to our North American Building Block offers a clear, consistent and historically successful approach to ‘small cap’ investing that is complementary to our other, largely stock-specific ideas within the allocation,” Webb said.
“We also continue to see good value in selective alternatives, particularly listed infrastructure. These investment trusts have been at a wider than usual discount in the past 18 months and although they have narrowed recently, we continue to see an attractive long-term return profile from these holdings.”
