Walker Crips duo play it straight on asset allocation

Gary Waite and Andrew Morgan, managers of the Walker Crips Managed Portfolio Service range, state that the more boring their funds are, the better, and that if they suddenly start shooting the lights out, they would worry they had taken on too much risk.

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Morgan does not anticipate the Bank of England will rapidly increase rates, though, saying next year there will likely be incremental rises before potentially peaking at 1.5% in the next couple of years.

The only significant bias in the portfolios is towards alternatives, which Morgan and Waite view as the only major area where delivering a return is possible. They are currently 3% overweight the 15% benchmark.

As such, absolute return features in the portfolios accessed through the Aviva Investors Multi-Strategy (Aims) Target Income Fund. Despite lacklustre performance during the bull run, Morgan and Waite are sticking with the fund because they like the investment process and believe it has potential to protect portfolios if markets drop.

“It is very similar to what we preach at Crips,” says Waite. “The risk of the portfolio is put at the same level as the investment idea generation and, ironically, they use the Blackrock risk system we have trained on.”

The Alpha:r2 range is also allocated to the Jupiter Absolute Return Fund, the Natixis H2O Multi Returns Fund and the First State Global Listed Infrastructure Fund.

Going green

Last month, Walker Crips entered an exclusive arrangement with ethical data provider Ideal Ratings to screen UK equities in its Alpha:r2 range. The hook-up sees Ideal Ratings identify UK companies with good ESG scores, particularly concerning corporate governance, and screen companies for Sharia and UN Global Compact compliance.

In-house screening is a recent development but ethical and ESG considerations have coloured Walker Crips’ entire range since inception. The firm screens its inhouse UK equities and for its overseas and fixed-income exposure it buys specific ethical funds.

The ethical portfolio is only available for one risk category at present but Walker Crips aims to offer this across its entire range in future. Waite describes this portfolio as “dark green” because it screens out the likes of gambling, tobacco and alcohol, whereas the standard models have an ESG overlay that might not necessarily knock out certain sin stocks.

Waite explains the ethical portfolio has “the least amount of assets with the most amount of interest”, but there is still a need to educate investors that going ethical does not mean losing out on returns.

“It almost requires a re-education to show there is not a performance discount if you go ethical,” he says. “You cannot get a good sustainable return from a company that does not have sustainable practices. That is why we have decided to integrate ESG across the entire range.

“We don’t think of it as an ethical consideration but an investment consideration.”

Stick to your knitting

The Walker Crips Alpha:r2 portfolios are only available through IFAs which, says Waite, leaves him and Morgan free to concentrate on the investment of the portfolios rather than individual client management.

“Our skill is in the investment management. The IFAs we work with their strength is in wealth planning and softer skills.

“There is a huge responsibility on us to manage people’s life savings and whatnot, so all we want to do is to be able to provide that consistent approach.

“It means clients and advisers can go to sleep at night knowing what they are investing in is large-cap listed equities and liquid collectives, not Bermudan property.”

Morgan adds it is also a reflection of where the industry is heading.

“IFAs are outsourcing more and more and we don’t see any reason why that is not going to continue,” he says. “You don’t see many investment managers having direct relationships with 70-year-old widows.”