ASSET ALLOCATOR BERRY ASSET MANAGEMENT
“ I have never
yet come across
any fund manager
that wants to buy
an expensive stock
– they all want to
buy things cheaply,
as we all do. There
are a lot of growth
managers out there
masquerading as
value managers,
and a lot of
value managers
masquerading as
growth managers
”
Mark Robinson, chief
investment officer, Berry
Asset Management
given the belief that his
Invesco Perpetual income
vehicles are too large and
lack manoeuvrability.
Equity income is also the
favoured route into international
markets, although
Robinson acknowledges
that the choice of suitable
funds is thinner here.
Nevertheless, investments
include Newton Asian
Income, JPMorgan US
Equity Income and Argonaut
European Income.
Berry groups investors
into five separate strategies
– Defensive, Cautious,
Balanced, Growth and
Adventurous. The latter
holds the greatest allocation
to emerging markets
(8%) through diversified
global emerging market
funds from Aberdeen and
Hexam, although the team
are reluctant to go much
higher than this given the
political and currency risk
of investing in these developing
economies.
Also, the underlying
see-through exposure to
the emerging world is
boosted if one takes into
account the separatelyclassified
exposure to Asia
and the overseas earnings
generated by Western
companies.
l Fixed income
The biggest call the team
made in 2011 was actually
in fixed income where, in
the balanced mandate, a
10% exposure to indexlinked
bonds was halved.
The money was redirected
into short-term government
bonds via an ETF.
Says Robinson: “If there
is one thing that we wish
we had done – in common
with every private client
manager in the City – it
would have been to go
more aggressively into
longer-dated government
bonds this year.
“At 3% yields, gilts
looked expensive. At 2.2%
they look incredibly expensive.
But we still made a
good return out of our
index-linked positioning.”
In terms of active managers,
Berry prefers to use
strategic bond funds from
the likes of Newton,
Cazenove and L&G.
“They have not been
firing on all cylinders all
year, they have been
through rough patches,
particularly those that have
gone in high yield.
However, in the sort of
environment that we are
in, having the flexibility to
take those rate decisions is
really important,” adds
Robinson.
l The other alternative
Cash aside, Berry includes
all other investments in its
alternatives classification.
This includes commercial
property – where the preferred
choice is SWIP
Property Trust – as well as
a gold ETF from which
the team recently took
some profits.
Any exposure to Ucits
absolute return funds is
also classified in the alternatives
segment; vehicles
held include Absolute
Insight UK Equity Market
Neutral and BlackRock UK
Absolute Alpha. However,
while these have done
their job in protecting
portfolios during the
market falls of summer
2011, Berry is now looking
to trim its alternatives
exposure and reintroduce
more index-linked bond
exposure.
“Alternatives is a part of
the portfolio that has
declined rather than
increased over the past
two or three years, largely
because the jury is out on
a lot of these absolute
return funds and whether
they can genuine deliver
what they promise,”
Robinson explains.
Tactical asset allocation – November ’11
Defensive
Cautious
Balanced
Growth
Adventurous
0 25
550 0 75
1100
0
Source: Berry Asset Management
UK eq income
UK eq growth
Overseas eqs
Commercial
property
Alternatives,
inc gold
Fixed interest
Cash
“That has led us down
the route of increasing the
fixed interest element of
our portfolios in to strategic
bond funds and more
vanilla instruments.”
l Let’s get physical
A priority according to
Robinson is that any investments
held have to offer
liquidity and, in the case of
ETFs or ETCs, physical
rather than synthetic ETFs
are preferred. Still, the
team are great believers in
active managers and in getting
the best deal for their
money there is favouritism
towards those that take an
unconstrained approach
rather than being wed to
any benchmark.
Despite the economic
gloom, and that markets
are currently largely dictated
by the macro, Robinson
believes there will always
be opportunities for genuine
active stock pickers.
“I think there is a general
confusion out there as
to what growth is and what
value is,” he remarks. “I
have never yet come across
any fund manager that
wants to buy an expensive
stock – they all want to buy
things cheaply as we all do.
There are a lot of growth
managers out there masquerading
as value managers,
and a lot of value managers
masquerading as
growth managers.”
l Back-up plan
In parallel to a core buy
list of around 60 funds,
Berry also maintains a secondary
reserve list of one
or two funds for each
sector which are covered
as part of the extensive
fund research.
“There is always something
in the wings, so we
can put it in quickly and
not wait two or three
months to find a replacement,
say, if a fund blew up
and we want to get out
quickly,” explains Robinson.
“We are not trying to
find new ideas every day
of the week. We have a
core buy list and we make
sure those are kept under
control, and that we meet
the managers.
“New funds may not
come up on a quant screen
because they may not have
a three-year record, so that
is where we have to keep
in touch with the market
place, finding out what
managers are doing, who
is moving and if there is
anything else there that we
want to be buying.”
32 PORTFOLIO ADVISER [www.portfolio-adviser.com] JANUARY 2012
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