Quilter Investors’ Monthly Income range has added local currency emerging market debt and hedge funds as asset classes, as part of a reorganisation of its strategic asset allocation.
The range, run by portfolio manager Helen Bradshaw and CJ Cowan, has invested in the L&G Emerging Markets Government Bond (Local Currency) Index to gain exposure to local currency EMD.
EMD exposure will stand at 1.25% in the Monthly Income portfolio and 0.75% in the Monthly Income & Growth portfolio.
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The fund range has also revised how it views its fixed income exposure, by breaking it down into four parts rather than a single broad index.
The move means the range can target more specific opportunities in corporate and government bonds, with the managers adding Premier Miton Corporate Bond Monthly Income fund and the Vanguard EUR Government Bond ETF.
The managers have also reduced exposure to high yield bonds due to tightening spreads, while they have introduced BNY US Equity Income as a way to target companies outside of the large mega cap tech names.
Bradshaw said: “As markets change and adapt, we too want to ensure the Monthly Income portfolios are optimised to their full potential, giving diversified returns and income streams to advisers and their clients. The income space is becoming a really interesting part of the investing world with innovative approaches being taken across asset classes.
“We continue to seek ways to give our investors the opportunity to access asset classes and funds that would perhaps be out of reach or where research is not as widely available outside of a multi-asset portfolio structure. As such, we are excited to see what our new emerging market debt and hedge fund exposure can bring to the return and income profile of the portfolios.”
Alternatives
Within the range’s alternatives exposure, hedge funds have replaced UK property as an asset class.
However, the managers said this is a procedural change, rather than one that has practical implications for fund positioning, as property funds have not been held by the portfolios for several years.
The Ardea Global Alpha fund has been added to the range.
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Cowan added: “We have also taken this realignment of our strategic asset allocation as an opportunity to resize existing exposures and introduce some interesting new holdings.
“Given where markets sit currently, we wanted to increase the defensiveness of the portfolios. The value and small cap tilt in the range has been moderated in favour of larger cap holdings but there is still a bias there, as you would expect in an income fund.
“We believe this provides a more balanced portfolio that should perform well in a wider variety of market conditions while offering similarly attractive yields.”
