Our asset allocation
We frequently review funds that claim to have an edge in asset allocation, but our 19-question ‘IQ’ scoring process often reveal these funds to be less consistent at generating outperformance than their more structured-process counterparts. We therefore similarly do not consider our core skillset to be in large asset allocation decisions, but instead at finding the best fund managers in the areas of the market we deem credible for investment. We prefer to let our deeply research-driven, active managers generate the performance. That said, we will tilt our portfolios in different directions, particularly at extremes, where we consider more value to be or to styles which may outperform in firmer (or weaker) economic conditions.
For those invested in our Lifestyle portfolios (for the following we did also make similar moves in our Navigator portfolios), you will likely know the strategic asset allocation of the portfolio is set by a third party. As you can see, we rotated the portfolio away from safe havens in government bonds last year, reaching a 3% underweight versus the benchmark, after the extreme outperformance in Q1. We added to corporate bonds at the end of March last year, an area which had underperformed dramatically for the security of the cash flows on offer, reducing this as the market normalised through the latter half of the yearly. However, we do not expect such conditions to arise again quickly. Indeed, we now consider corporate bonds to be richly valued. Recently, we have been rebalancing the portfolios with more safe havens and less corporate bonds.