The retail distribution review will benefit multi-managers as it will boost the number of advisers who outsource portfolio management, boutique fund manager Tim Gardner has said.
However Mr Gardner, co-manager of three multi-manager funds for Legal & General, said when advisers outsource investment management they will not just demand expert fund selection, but also asset allocation skills, which he claimed were rare among multi-managers.
He said: “People will increasingly see the need for asset allocation ability. Fund selection is one skill, but in these volatile markets in particular you need to be flexible and pragmatic and also add value through asset allocation, and there are not many multi-managers who have the skills and technical knowledge to do so.”
Mr Gardner said that most multi-managers who employ asset allocation do so mildly, taking small positions and low convictions, with more emphasis on fund selection.
Mr Gardner and co-manager Alan Thein, who founded the L&G multi-manger business in April 2008, have a background in asset allocation and use this high-conviction approach when managing their three portfolios – the £250m Multi Manager Growth fund, £30m Multi Manager Balanced fund and £233m Multi Manger Income fund.
In the fourth quarter of last year Mr Gardner raised the equity share of the portfolios’ weightings towards Asian emerging markets.
He said: “There is positive structural long-term growth in those regions, consumers are less indebted and governments are less indebted than their developed counterparts.
“Many of these countries, such as China and Brazil, are also starting to ease policy and valuations have become cheaper.”
This fund strategy will continue this year, along with high-conviction positions in specialist equities, such as gold and energy.
According to Mr Gardner, gold is strongly correlated to real interest rates and people will hold on to gold while rates remain low and offer poor returns.
He said: “Rates will stay low because we are in an era where fiscal austerity is being implemented and when you cut back fiscally, you cannot raise interest rates.”
Mr Gardner also said gold and energy equities were undervalued compared to the price of gold and energy commodities, but were producing significant cash flows, increasing dividends and stronger balance sheets.
He added: “In the past year there have been points when gold equities have become cheap and we have used those occasions to add to our exposure. Gold equity valuations are even more attractive now than in 2011.”
In terms of fund selection, Mr Gardner stressed the need to have some type of allocation to absolute return and alternative strategies to combat volatile markets.
He said: “We hold the Jupiter Absolute Return fund and GLG Alpha Select Alternative fund in all three of our funds.”
Source: FT Adviser
