BY GARY SHEPHERD
Arguably the biggest challenge
for professional
investors today is protecting
their clients’ capital in a
backdrop without any true
safe havens. The characteristics
of traditional defensive
asset classes have
been turned on their head
in the past few years,
forcing asset allocators to
climb off the fence and
make a call on where real
growth will come from in
the years ahead.
For Berry Asset Management,
a West End-based
wealth manager with some
£630m under management
on behalf of individuals,
private families and trustees,
the most feasible
‘defensive’ call with growth
potential is equities, particularly
equity income,
and this has been the case
for the past 12 to 18
months.
“Risk and fear assets
have swapped places in
the past few months”,
explains chief investment
officer Mark Robinson,
who is chairman of the
firm’s investment committee
and heads up the
investment strategy
and research into investments
funds.
“In an odd way, there is
probably more danger in
government bond markets
at the moment than in
equity markets. That is
why we are staying fully
up to our commitment in
equities.
“We are not in the camp
that believes there will be
a major decline in equity
markets because there is
some fundamental support
there. However, that comment
does rely on Europe
working towards a solution,
and there is currently
a lot of brinkmanship
going on.”
l On the defensive
Regardless of the ongoing
eurozone crisis, Robinson
believes that activelymanaged
equity income
funds – particularly in the
UK where there is a strong
dividend culture – offer
encouraging defensive
characteristics.
He says: “In the UK, by
buying equity income
funds, you are buying funds
that are not so economically
sensitive, and companies
that fundamentally have
been through many recessions
and are capable of
ASSET ALLOCATOR BERRY ASSET MANAGEMENT
Staying in familiar territory
Given its belief that government bond markets are currently more
risky than equities, Berry Asset Management is sticking with equity
income as a solid asset class in tough times
Strategic allocation ranges to equities
Defensivee
(Risk profile 1) )
0%-20%
Cautiouss
(Risk profile 2) )
20%-40%
Balanced d
(Risk profile 3) )
40%-60%
Growthh
(Risk profile 4) )
60%-80%
Adventurouss
(Risk profile 5) )
80%-100%
0 20 40 60 80 100 10
Source: Berry Asset Management
paying very strong and
improving dividends; they
have very strong balance
sheets and are survivortype
businesses.
“When things are going
very well there is a lot of
momentum in the markets,
as you had from March
2009 to mid-2010, when it
was all about recovery
and the market did not
want to own a bean in
these defensive compa-
BERRY AM: KEY FUND PICKS
FIXED INTEREST
� Newton Global Dynamic Bond � M&G Index-Linked Bond
� Cazenove Strategic Bond � iShares FTSE Index-Linked
Gilts ETF
UK EQUITIES
� Franklin UK Equity Income � Artemis Income
� Liontrust Income � River & Mercantile UK Eq Inc
OVERSEAS EQUITIES
� JPMorgan US Equity Income � Newton Asian Income
ALTERNATIVES/ABSOLUTE RETURN
� ETFS Physical Gold � CF Ruffer Total Return
� Absolute Insight UK Equity
Market Neutral
Source: Berry Asset Management
nies. But they were still
plugging away and doing
a decent job, it was just
that the relative attraction
was that there were more
gains to be made in the
growth camp.
“However, if you draw
out the string, over the
longer time horizon, these
dull and worthy companies
are really capable of delivering
very solid capital
growth and dividend
growth. The compounding
effect of those is very
powerful.”
l Pick of the crop
The team has eight UK
equity income funds on its
buy list, split into core
holdings and more nimble
satellite funds.
Key picks in this area
include renowned UK
equity income funds from
the likes of Artemis,
Liontrust and Neptune,
although one manager
avoided is Neil Woodford,
SUMMARY
Berry uses both active
managers and ETFs; for
the former, unconstrained
stock pickers are the
preferred choice.
The team offers five riskrated
mandates. Allocation
to equities ranges from 20%
in the defensive portfolio up
to 92% for the most
aggressive option.
A core buy list of around
60 funds is complimented
by a secondary reserve list
of one or two funds in each
sector – funds can be bought
or sold quickly as research
has already been carried out.
JANUARY 2012 [www.portfolio-adviser.com] PORTFOLIO ADVISER
31
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