Sunnier outlook after ‘perfect storm’

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Conditions conspired to stall Williams de Bröe Assetmaster Growth’s first-half performance, according to its lead manager. He expects a better second half, and the strategy will not change.

Williams de Broë Assetmaster Growth has been hit by a “perfect storm” this year, says Laurence Boyle, the lead manager on the £50m portfolio. Overweight positions in American megacaps, emerging markets and gold shares worked well in the second half of 2010, he says, alongside underweights in Britain and continental Europe. In 2011, however, only the zero allocation to Japan has boosted relative performance.

But despite the strategy’s short-term underperformance, the Assetmaster team is not about to “change its spots”.

Boyle says: “We’ve been hit by asset allocation, our style and sectoral position, the disconnect between the gold price and gold shares, and underneath the bonnet we’ve had a few fund ­managers that have struggled a bit. But we suspect things will look a bit rosier in the second half of this year.” (Fund of funds continues below)

Boyle says the team makes asset allocation decisions on a medium-term view. The last significant shift was a switch out of continental European equities and into American megacaps in 2010. Boyle sold his holdings in European products run by Argonaut Capital Partners and Neptune and increased exposures to Martin Currie North American Alpha, a concentrated 25-stock portfolio, and Gartmore US Growth.

 


The Martin Currie fund has struggled in relative and absolute terms. The portfolio - Assetmaster Growth’s biggest holding at the end of April - lagged the Investment Management Association (IMA) North America sector over the past one and three years, falling by 8% over the longer time-frame, compared with a peer group gain of 16%. Boyle says he still views Tom Walker, its manager, as “a steady pair of hands”.

Gartmore US Growth, meanwhile, comfortably outpaced the sector over the past one and three years. Boyle says the fund, run by Marsico Capital Management, is a complementary holding for Martin Currie North American Alpha. “[The two funds] give us exposure to 60-odd stocks in the top 300 by market cap in America, with a growth bias,” he adds. “That is the type of project we do in terms of blending funds.”

 


Besides long-only equity funds, Assetmaster Growth uses structured products and closed-ended vehicles. The Banesto FTSE Autocall structured product - the portfolio’s second-largest holding - will pay out an annual coupon of 17.75% if the FTSE 100 is above 6,140 on the anniversary of its creation in November 2007. If it “autocalls” in November this year, the product will return a 71% gain to investors. However, if it fails to hit its target by November 2013, clients will receive the sum they originally invested.

 


“We still have two-and-a-half years for the market to get up 5-6% from here, which isn’t a great deal to expect,” says Boyle. “Even if it doesn’t autocall, it’s still a great investment - as long as we sell it in the secondary market.” Similar products today offer cou­pons closer to 11%, he adds.

Looking ahead, Boyle says an improvement in the global economic outlook would boost relative performance of the Assetmaster fund. In particular, stronger developing world data would favour its overweight stance in commodities and emerging markets.

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