ASSET ALLOCATOR EVERCORE PAN-ASSET
Passive choices
A relatively new kid on the block in the discretionary
space, Evercore Pan-Asset keeps things simple with
an exclusively passive approach to asset allocation.
From a 100% cash position in 2008, chairman John
Redwood explains where the team is now positioning
itself for economic recovery
“
You only get a
bubble if the buying
power so exceeds
the potential supply
that it forces the
price up way beyond
normal valuation.
We do not see that
happening yet
[in China]
”
BY GARY SHEPHERD
The rise of ETFs as viable
low-cost passive investments
has coincided with
the set up of a number of
wealth management businesses
that principally
bypass active managers
altogether in favour of a
more clear-cut approach to
asset allocation.
Evercore Pan-Asset was
originally set up under the
Pan-Asset banner in 2007,
by John Redwood,
Christopher Aldous and
the now sadly deceased
Robert Brown, before
becoming 50% owned by
US-listed Evercore Partners
one year later.
Today the firm looks
after around £200m with
30 clients from pension
funds to charities and other
high net worth individuals.
It employs 10 staff, headed
up by Redwood as chairman
and Aldous as chief
executive.
The firm prides itself on
keeping it simple by buying
an index rather than individual
stocks. It also avoids
any complex products
which use gearing as these
often carry both higher
costs and higher risk.
Redwood explains: “It is
difficult enough to make a
sensible judgement about
whether shares are worth
holding, and we think it is
dangerous to be so confident
on your judgement
that you do it on borrowed
money as well or through
geared options. We also do
not recommend going short
of markets – in 2008 we
recommended being in
cash, which by industry
standards was a bold move,
but people were still going
to get a positive return on
deposit. If you shorted the
market you could have lost
a lot of money.”
l China overheating
From a 100% cash position
in 2008 for most discretionary
clients, 2009 saw the
team buy into a mixture of
a global equity index and
specialist areas, particularly
Asia ex Japan and emerging
markets.
In retrospect, Redwood
sees 2008 as having proved
that while Asia can grow
on its own because of its
self-sustaining domestic
consumption growth, it still
remains to some extent
dependent upon demand
for its exports from the US
and Europe. However,
while we have seen frantic
action by authorities
around the world to stimulate
activity, this has been
most effective in China.
Here the government was
in a strong financial position
at the start of the slowdown
and so has been
able to ease monetary
policy dramatically by
injecting substantial sums
into the economy through
direct spending.
The possibility of an
overheating of Chinese
equities remains a very real
fear in 2010, particularly
given the vast amounts of
foreign investment that has
flowed into the domestic
stock market and through
Hong Kong. However, for
Redwood the positives outweigh
the risks.
He says: “There could
be a risk of too much
money going in, but these
countries are growing very
rapidly so there will be
supply on the other side of
the account as well as new
businesses that are set up
and old businesses that
wish to raise more money
to expand rapidly. You
only get a bubble if the
buying power so exceeds
the potential supply that it
forces the price up way
beyond normal valuation.
We do not see that happening
yet.”
l Exposure to India
He adds: “Other managers
may only have 5% or 10%
in these [emerging] markets
at the moment, but we
would see that as very low
given the balance probabilities
on where the growth
and the capital appreciation
is going to come from.
There is still more buying
power and a case can still
be made.”
Total return in UK sterling terms – 10 years
Topix Japan
S&P 500
MSCI World
FTSE All Share
*R’ters/Jeffr’s CRB
£ 1-Month Libor
FTSE Euro ex UK
IPD UK Property
UK Gov Bonds
MSCI Far East ex Jpn
Cred Suisse/Tremont HF
Gold Index
MSCI India
*Hang Seng
China Ent’prise
* Capital return from
31 Oct ’99 – 31 Oct ’09
-100 0 100 200 300 400 500
Source: Thompson Reuters, Evercore Pan-Asset
32 PORTFOLIO ADVISER [www.portfolio-adviser.com] JANUARY 2010
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