In its latest re-balance of portfolios, the Evelyn Partners Core Managed Portfolio Service (MPS) team has increased its exposure to government bonds at the expense of corporate bonds. Alternative assets, namely absolute return funds and real assets were also reduced.
In the government bonds space, the team have added to their holdings in Vanguard US Government Bond Index (hedged share class) and the CG Dollar Fund, which invests in US Government index-linked bonds.
The team has also made a small adjustment to the balance within the equity element of the portfolios. While the overall allocation to equities remains unchanged, the managers have scaled back their UK exposure in favour of the US and have added a new holding in GQG US Equity, a large-cap focused US best ideas fund managed by QGG Partners.
James Burns, lead manager of the Evelyn Partners Core MPS commented:
“We continued our theme of recent rebalances of adding 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.
“To make room for these moves we trimmed back the allocation to corporate bonds as credit spreads have continued to tighten to levels that their protection characteristics have become less obvious. Where we retain exposure, it is significantly skewed to short-dated bonds that should fare relatively well in the event of any downturn. Alternative assets, namely absolute return funds and real assets were also reduced as their attraction compared to government bonds fades.
“Although at the index level US equities have been strong this year, this masks the fact that this has been driven by a handful of tech names which have benefitted from hype around Artificial Intelligence. We see scope for this rally to broaden out and have added a new holding in GQG US Equity that should be well placed to capture this theme as well as complementing the existing positions.”
Please see the re-balance note for full details on the changes made to individual portfolios.
