Fleet-footed moves keep fund on top
Share
The managers of Cazenove Multi-Manager Diversity Tactical embraced a risker strategy by rotating allocations from a defensive position, which propelled the fund to the top of the table.
Agility was the most important factor in helping the Cazenove Multi-Manager Diversity Tactical fund reach the top of its peer group’s one-year performance table, according to its management.
While some funds have restraints in terms of allocation limits, Robin McDonald, a co-manager of the fund, says he has the ability to use a flexible approach when allocating to equities, fixed income, cash, and alternatives. “The fund’s flexibility allows us to be up to 98% in any one of these areas, like equities or alternatives,” he says.
Last year was a particularly tough environment, but the Cazenove Multi-Manager Diversity Tactical fund enjoyed strong performance. Over one year to February 10, 2012, the £35.9m fund tops the table of IMA Flexible Investment (formerly Active Managed) fund of funds, returning 3.28%, according to Morningstar. (Continues below)
This was achieved by rotating allocations from a defensive position. McDonald says the fund started last year with equity weightings between 50% and 70%, but this weighting ended 2011 “quite a bit higher”. This contrarian move paid off, while most investors preferred a risk-off approach as bad macroeconomic news compounded towards the end of last year.
Cash weightings were also removed from about 20% at the beginning of 2011 to just over 7% at the year end. “The view we took towards the end of last year was that it no longer paid to be defensive,” McDonald adds. “I’m not saying that owning stocks such as tobacco will not be successful over the long term, but this was a call on relative value. This is how we have rotated the portfolio.”
McDonald can illustrate this riskier approach with the changes to the underlying funds in his portfolio. “Looking at UK equities, for example, the biggest holdings at the beginning of last year were Invesco Perpetual Income and JOHCM UK Opportunities, which are both über defensive. We have totally sold out of the Invesco fund and have significantly reduced JOHCM.”
Another interesting feature of the fund is its range of ’alternative’ holdings, which are made up of funds not commonly found in multi-manager portfolios, such as hedge funds. While the Jupiter Absolute Return fund was the biggest holding in this section as at the December 31, 2011, there are some unfamiliar names as well.
McDonald adds: “We are interested in investing in hedge funds that genuinely hedge. We picked up a few such as Eclectica, which was up [about] 10% last year, and Majedie Tortoise, which was up [about] 8%. These types of fund provide good value to us.”
While McDonald and Marcus Brookes, the fund’s co-manager, appear to have called the market right in 2011, they are confident of positioning for 2012 as well. McDonald adds: “We made significant changes at the end of last year. What we try to do is preserve capital when the market falls. When the market starts to offer opportunities, as it did at the end of last year, if you have been able to preserve capital it is a lot easier to stay on the front foot.”
To receive more relevant articles like this one, why not sign up to our briefings and breaking alerts by clicking here and Follow @fundweb
