As we rapidly approach the new year, we thought it would be useful to highlight the portfolio activity over the last couple of months following the migration to the new Asura platform, as we took advantage of the market volatility.
In the first tranche of purchases in early November we bought back into Emerging market equities through two excellent actively managed funds that invest into these more growth orientated areas of the global market, whilst remaining cautious on China. We also purchased the European Equity long / short fund as an excellent diversification vehicle that can benefit when markets are volatile and certain companies are challenged. We also purchased the UK Gilt Fund, which following the extreme volatility after the Liz Truss mini budget debacle, had settled down at excellent levels for the medium to long term investor following the return to sensible fiscal policies by Rishi Sunak and Jeremy Hunt. The yield on this Gilt fund at purchase was roughly 3%.
In the second tranche, for those portfolios with direct equities, we bought back into the Japanese allocation through the purchase of Nintendo, SMC and Mitsubishi Gas Chemical; these companies are excellent global companies that reached attractive levels as the Pound strengthened through November. In addition, we purchased a portion of the European exposure, namely L’Oreal and Novartis for the same reason as the Japanese holdings, as the stronger pound helped them reach our price targets.
This week, in the third tranche, we have further moved to take advantage of the higher interest rates in the fixed income markets by increasing the corporate bond exposure by topping up the existing Rathbone High Quality Bond Fund, now yielding around 3%, and we have added in a new global bond exposure, AXA Global Short Duration Bond Fund, to capture fixed income opportunities around the world through a mix of bond strategies including investment grade, high yield and securitised debt which are managed to a short duration and is expected to hold up well even in a rising interest rate environment.
Following these trades the equity allocation is now at the middle of our strategic asset allocation range, having been at the lower end during the migration period, which proved to be well positioned during the significant volatility at the time. To date we have held back buying into the US growth orientated direct companies as we factor in expected earnings weakness in Q1 2023 and the ongoing strengthening Pound against the US Dollar. This patience has also paid off as these companies have seen their share prices stall in GBP terms. Over the coming weeks we shall be closely stalking these companies looking for improved entry levels for the medium to long term. In the meantime, portfolios remain exposed to the broad US markets through the iShares MSCI World ETF, which currently has roughly 70% exposure to the United States.
The portfolio remains underweight to both the alternatives and fixed income allocations as we await improved entry levels. In the fixed income allocation we are awaiting the right pricing levels to invest into US Treasuries and in the alternative allocation we are looking for improved pricing levels for our entry into our alternatives targets including the US based care home REIT and potentially a US Equity long / short fund.
With the hawkish central bank rhetoric over the last few days we are seeing increased pressures on the markets and believe that there will be volatility ahead as the much anticipated recession likely becomes a reality in 2023 and earnings expectations are potentially reigned in. This volatility will provide us the opportunities to invest at much improved medium to long term prices.
Important Information
This article is for information only and does not constitute advice or recommendation and you should not make any investment decisions based on it. The views and opinions of this article are those of Casterbridge at the time of writing and may change without notice. Any opinions should not be viewed as indicating any guarantee of return from investments managed by Casterbridge nor as advice of any nature. It is important to remember that past performance and the value of an investment, and any income from it, may go down as well as up and the investor may not get back the original amount invested.
