Quilter’s WealthSelect managed portfolio service (MPS) has reduced its exposure to government bonds following a “sharp rally” in prices in recent weeks.

In January, the portfolios undertook an ad hoc rebalance following the moves higher in government bond yields amid ‘souring’ investor sentiment due to further inflationary concerns and slow growth in the UK.

As bond yields have since moderated, Quilter’s portfolio management team felt it presented an opportunity to take some profits and lower the government exposure within the portfolios again.

The team added that proceeds from the reduction have been used to increase cash and/or alternatives, depending on the risk level.

They have also been changing the regional equity mix within the Managed portfolio range, taking some profit from the recent outperformance of the UK, alongside an increased allocation to emerging markets and Japan.

Meanwhile, in the US, the Quilter portfolio management team have continued to look for opportunities outside of the Magnificent Seven tech stocks.

The allocation to Quilter Investors Precious Metals has been “allowed to naturally increase” despite the ‘strong’ performance seen in the year to date, as the team recognised the risks to the macroeconomic outlook.

Similar moves were made in the Responsible range of WealthSelect portfolios, alongside the addition of the AllianceBernstein International Health Care Portfolio.

Quilter’s team saw current valuations within the healthcare sector as a good opportunity to increase exposure to the market in place of other thematic holdings.

In the Sustainable range, Impax Global Social Leaders was introduced within the social transition theme, while the allocation to the energy transition was also increased, with the Schroders Global Energy Transition Fund topped up.

“Earlier this year the opportunity presented itself to carry out an ad hoc rebalance following the spike in government bond yields,” Quilter WealthSelect portfolio manager, Stuart Clark.

“We believed the market reaction was a little exaggerated and we are pleased the trade has added value for clients.

“Donald Trump’s return to office has brought a flurry of activity, and as such we need to be vigilant to the opportunities as they present themselves. This year has seen a broadening of return drivers, and we expect this trend to continue as the world adjusts to the new normal.

“When we make decisions, it is not on the basis of expecting a short-term payoff but reflecting our expectations of opportunities over the next six to 12 months. The heightened levels of volatility allowed us to take this profit much sooner but has also allowed us to add value from this rebalance following the sharp rotation in sentiment in the week following the trades.

“We’ve also added new holdings to the Responsible and Sustainable ranges. Thematic sectors like healthcare and the energy transition are particularly attractive, with structural tailwinds that should keep blowing for years to come, despite current events in the US.

“We have been really pleased with the support for our Responsible and Sustainable ranges over the past three years. With the additions we have made, the portfolios continue to adapt as the responsible and sustainable investment market evolves. They are exciting spaces to operate portfolios in and we are looking forward to many more years supporting advisers and their clients who have such preferences.”

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