F&C's Multi Manager Team reposition funds to increase risk exposure

F&C's Multi Manager Team have reintroduced the AXA Framlington Equity Income fund, managed by George Luckraft, to their portfolios as part of tactical positioning to increase risk exposure at stock level.

AXA Framlington Equity Income was previously part of the Multi Manager and Lifestyle portfolios until February 2008, when Dean Cheeseman (Head of Retail Multi Management) took the decision to exit the fund.

Paul Carne, Fund Manager in the F&C Multi Manager Team commented: "Last year's decision to exit the fund was not based on any concerns over manager George Luckraft's capabilities and was simply indicative of a belief that his funds investment style no longer mirrored our strategy. Specifically, the small and mid cap exposure within the fund, when combined with other UK positions in our portfolios during that period, resulted in over exposure to smaller and medium sized company stocks at a time when our investment thesis was that larger companies would perform better."

The F&C Multi Manager Team previously focused on security of earnings and financing, as reflected in their decision to invest in funds with an overall sectoral bias towards more defensive sectors and thus reflecting a penchant for harnessing cash flow yield.

However, the market has experienced some vicious sector rotation over the last 18 months or so, for instance utilities outperforming basic materials by 64% and then subsequently underperforming by 75%. The team believe that these huge sector moves have been driven from a very macro perspective on the world, where the health of the financial system was at risk. It now seems that, with debate about the strength of the recovery being pushed to one side, the full extent of the problems has been appreciated and policies set out to address them.

"It is our view that going forward markets will be increasingly driven by micro factors. In practice, we feel this means that the market will gradually begin to choose between the winners and the losers within each sector, rather than just focusing on which sector will perform best", Carne explained. "18 months on, our tactical positioning is designed to reduce the element of our risk budget associated with sector risk and instead increase stock specific risk. We believe that the AXA Framlington Equity Income Fund is well-suited to the risk exposure we are seeking".

"As a result, we have taken a 3% position in both Multi Manager Distribution and Multi Manager Cautious, the two portfolios in our range that have yield requirements".

Elsewhere, the team have instead re-organised existing fund holdings in line with their tactical positioning theme. BlackRock UK Special Situations and Rensburg Select Growth have been added to all of the Multi-Manager and Lifestyle portfolios, taking positions to 3%, with the exception of Lifestyle Growth which holds 2%. To fund the new acquisitions, the team have reduced positions in Artemis Income and Threadneedle UK Equity Income Alpha to 4% and exited Rensburg UK Equity Income in Multi Manager Growth and Multi Manager Balanced, whilst continuing to hold this in the remaining Lifestyle and Multi Manager portfolios.