Quilter Cheviot has increased the overall risk exposure of its managed portfolio service (MPS) by adding to its global equity allocation in its latest rebalance.

The MPS team decided to hold a modest overweight allocation to equities overall, as they believed the chances of a global recession had fallen and that individual stock opportunities were continuing to materialise, despite concerns about market concentration and elevated multiples.

Its increased allocation to global equities was primarily funded by reducing exposure to UK equities in the Balanced and Income portfolios, while also reducing the overall allocations to cash, hedge, and absolute return strategies.

During the third quarter, the MPS team of Simon Doherty, Antony Webb, and Oswald Oduntan also broadened exposure to the semiconductor industry through the addition of Broadcom to the MI Quilter Cheviot North American Equity Fund, in place of Salesforce.

Within the MI Quilter Cheviot UK Equity Fund, the team swapped its holding in Tesco for a new position in Marks & Spencer (M&S), and added a new holding in the UK via Lancashire Holdings, a global speciality (re)insurance provider.

The team also initiated a position in the Heptagon Driehaus Emerging Markets Equity fund to take advantage of a period of perceived relative weakness for the fund, as they believed the fund’s current positioning reflected a growth bias.

In Europe, the portfolios have seen their healthcare allocations adjusted, alongside the addition to financials of insurance and services firm Allianz.

“There are a lot of negative views out there in the market just now, with talk of bubbles and overstretched valuations,” said Quilter Cheviot head of managed portfolio services, Simon Doherty.

“While we obviously cautiously observe that, we don’t feel like now is the time to derisk. Earnings season has kicked off well and there are a lot of opportunities still presenting themselves. As such, we wanted to use this opportunity to tweak some of our exposures within our building block funds and focus on the individual stocks we believe should continue to do well.

“Broadcom was one of those investments and allowed us to diversify our tech exposure. It continues to demonstrate its expertise in the production of so-called application specific integrated circuit (ASIC) chips, designed to support large and standardised workloads at a materially lower cost. With a key OpenAI deal in place too, its growth prospects look strong over the near and medium terms.

“We also continue to find new ideas in the UK that allow us to diversify our return drivers, with the addition of both Lancashire Holdings and M&S to the UK building block.
“While we watch the economic and fiscal position of the UK, and other developed markets, closely, there remains good, positive stories out there to latch on to and take advantage of.

“Similarly, emerging markets are showing signs of further attractiveness thanks to stabilisation within the Chinese economy and exposure to growth within India.

“Our building block structure allows us to remain highly nimble and selective, avoiding pockets of exuberance at a time when market concerns are starting to grow louder.”

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