Quilter takes opportunity to up WealthSelect fixed income exposure

Ad-hoc rebalance was triggered by the ‘challenging’ economic backdrop in the UK

Quilter has upped the traditional fixed income allocation within its managed portfolio service following the “extreme” sell off in government bonds in 2022.

The WealthSelect portfolios have previously been underweight to traditional fixed income in favour of alternatives, but will now add to the Aviva Global Sovereign Bond fund in its managed and responsible ranges.

The responsible blend portfolios has seen an increase to the HSBC Global Government Bond Index fund, giving passive exposure to developed market government bonds.

The ad-hoc rebalance comes outside of the firm’s usual quarterly reassessments. In September’s quarterly rebalance, Quilter reduced its equity exposure in favour of a heavier weighting to fixed income but swerved gilts due to economic conditions in the UK following the ill-fated mini budget. The next rebalance will take place, as scheduled, in December.

Stuart Clark, portfolio manager of WealthSelect, said: “We set a high bar to carry out a rebalance outside of our quarterly periods. Given the challenging economic backdrop and how far government bond yields have come, it felt that now was the right time to take advantage of our flexibility and add to our exposure in the fixed income market.

“We have historically been underweight fixed income as a result of years of loose monetary policy and rock bottom interest rates. We have since seen a fairly dramatic shift in policy from central banks as inflation has run rampant and proved stickier than most first believed. With inflation still high, although now appearing to moderate, much of the world facing a cost-of-living crisis, it is natural that we will see economic growth challenged.

“As a result, while we don’t expect a sharp reversal in interest rates, we do think central banks will need to be innovative and adaptable with some form of support or easing. The diversification benefits of fixed income should begin to shine again after what has been an incredibly difficult year for the asset class. It is also an asset class we will continue to watch with intrigue as we come up to our next scheduled rebalance in December.”

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