In its latest re-balance of portfolios, the Evelyn Partners Active Managed Portfolio Service (MPS) team has increased its allocation to cash and government bonds at the expense of equities and corporate bonds in all but two of the portfolios.
In the government bonds space, the team added to their holdings in AXA Sterling Index Linked Bond, Sanlam International Inflation Linked Bond and Vanguard US Government Bond Index (H).
To take advantage of the returns available from cash, the team significantly increased their holding in BlackRock ICS Sterling Liquidity.
James Burns, lead manager of the Evelyn Partners Active MPS commented:
“The reduction in equities does not reflect a particularly negative outlook, rather an acknowledgement that there is more uncertainty for risk assets and that it was prudent to trim our long-held overweight position. Corporate bonds have become less attractive as credit spreads have tightened to levels that make their protection characteristics in a portfolio less obvious. We therefore reduced exposure to longer dated corporate bonds but retain significant exposure to shorter-dated ones that should fare relatively well in the event of any downturn.
“We added to government bonds as expectations have risen that we are at or close to the peak in the interest rate cycle in developed markets. Government bonds remain compelling, for as well as offering attractive real yields, they should also provide a level of portfolio insurance were a growth shock to occur. Inflation-linked bonds also look interesting as we believe markets may be under-estimating medium-term inflation. Allocations to cash were also increased due to the attractive returns that can currently be generated – something we have not written in over 15 years!”