WealthSelect takes profits following market highs and adds to UK and Europe
The WealthSelect managed portfolio service has reduced its equity allocations to the US and Asia following strong market performance, adding to the UK and Europe as a result.
With markets hitting all-time highs in the third quarter of 2020, and uncertainty around Covid-19 and geopolitical events beginning to creep into the market, portfolio manager Stuart Clark took the opportunity to add to markets with lower valuations as well as assets that offer diversification qualities.
The recent quarterly rebalance saw the portfolios reduce overall equity allocations across all risk levels except for levels nine and ten. As an example, risk level five has seen an overall reduction in equities of 1.85 per cent, with the UK rising by 0.9 per cent and Europe up 0.1 per cent. WealthSelect remains underweight in both the UK and Europe across the peer group.
Within each region the portfolios have focused the reductions in growth managers which have outperformed, with value managers being topped up.
Traditional fixed income has been held flat, while profits have also been reinvested into alternatives, which have risen by 1.64 per cent in risk level five. This is despite profits being taken from holdings in gold following another strong quarter of performance, although the target weight has been increased quarter on quarter.
Stuart Clark, portfolio manager of WealthSelect, says: “As we enter the final part of the year we are expecting uncertainty to weigh on markets given the magnitude of the events scheduled. Not only are we continuing to grapple with the coronavirus pandemic, but we have a US presidential election that could turn volatile and questions over whether the UK and EU will reach a trade deal, or even plan to agree on one. There are clearly reasons to be cautious.
“As such, with valuations continuing to look frothy we felt now was a good time to lock in some of the profits we have achieved from some of our growth managers, while adding to areas of the market which have perhaps lagged of late.
“That said, we do not want to be overly cautious, instead simply look to add some diversification to the portfolios and look to take advantage where we see opportunities. We have been underweight to the UK for a while but it is increasingly looking attractive both relative to other markets and over a long-term period.
“Although Brexit continues to drag on and weigh on sentiment, the UK has not seen the recovery in asset prices that other developed markets have had following Covid-19 and once we have some political certainty we could see that recovery begin to play out.”
WealthSelect is the core managed portfolio service available through Quilter’s platform Old Mutual Wealth.