Financial planner Quilter has increased its allocation to fixed income following a review of model portfolios – and also revealed that it divested from an external impact fund due to a potential breach of an exclusion policy.
The changes are within Quilter’s WealthSelect Managed Portfolio Service, which has adopted an overweight fixed income strategy, allocating more to sovereign bond funds split evenly between global bonds and gilts.
Quilter – which is owned by Quilter plc, a group that has £101.7 billion in customer investments – said the portfolios have divested from the UBAM Positive Impact Emerging Market Equity Fund following an investigation into a potential breach of Quilter Investors’ exclusion framework for these portfolios. Further details have been sought.
Commenting on the topic, UBP’s impact team stated: “The company held in the fund is BYD, a major contributor to energy transition in China and beyond. The company specialises in producing electric vehicles, but through a subsidiary is also a supplier of components to a company selling heated tobacco products – “heat not burn” – which makes up less than 0.5% of the company’s business.”
A spokesman confirmed that the issue centred on one of the companies in the portfolio having a joint venture that included e-cigarrette production. Although revenue from this had ceased, there was not enough evidence for Quilter to override its own policy for sustainable potfolios.
The greater shift into bonds come as the asset manager continues to be underweight in risk assets across all ranges owing to declining corporate earnings and living standards against a backdrop of rising rates, said portfolio manager Stuart Clark.
“Developed market government bonds provide portfolios with an attractive opportunity at current yields and capital protection in a recessionary environment,” Clark said.
In the equity section of the portfolio, Clark shifted the UK equity allocation to larger overseas revenue-earning companies, anticipating potential currency fluctuations and reducing exposure to domestic businesses facing economic challenges.
Within the responsible fund range, the T.Rowe Responsible Asia ex Japan Fund’s position was reduced in favour of the Quilter Investors Asia ex Japan Large Cap Fund.
The portfolios adjusted their global specialist allocation by adding the Sparinvest Ethical Global Value Fund, Janus Henderson Horizon Responsible Resources Fund, and Quilter Investors Timber Equity Fund while reducing investments in Allianz Global Water and Candriam Equities L Oncology Impact funds.
Within the firm’s sustainable range, Clark reduced portfolio risk by increasing cash allocations to enhance defensiveness in a “challenging market”.
The divestment from the UBAM fund took place within the equity mix within the sustainable range and the proceeds were used to make the portfolios more defensive by adding to large-cap global multi-theme investments and increasing exposure to energy and social transition holdings.
