Here at Asset Allocator we spend a lot of time covering the extent to which allocators weigh the UK in their portfolios.
A few months ago we thought we’d discovered the DFM with the largest domestic equity exposure – in Momentum’s 23 per cent wedge – but alas we spoke too soon.
Bristol-based allocator RC Brown has blown its contemporaries out of the water with its hefty 39.5 per cent weighting to UK equities in its balanced proposition.
With this in mind we sat down with investment director Neil Whelan and head of managed funds Glenn Meyer to see how their portfolio makes best use of the domestic market and whether they think the UK has turned a corner.
“We take the view very much that our clients, by and large, have their capital in sterling and spend their capital in sterling,” Meyer said. “So when we go overseas, we look for this sustainable, incremental advantage, knowing that we're taking an incremental risk through currency.
“For many years, that has worked well, and then post-Brexit it worked against us for quite some time, because sterling was very weak. During that period, we increased our allocation to global markets.”
Their portfolio consists of nine active UK funds, plus the SPDR FTSE All-Share.
The team recently added to their positions in Artemis Income and JOHCM UK Equity Income, while calling time on their Schroder UK Alpha Income which, in their opinion, did not add anything meaningfully unique to their range of funds.
Selling up is not a decision they take lightly within the firm, as Whelan put it: when selling, they’ve got to buy something else, which means two decisions to make.
What next?
It’s not unfair to say that the FTSE’s performance over the past decade has paled in comparison to its cooler tech bro, the S&P 500.
But perhaps the tide is beginning to turn, and RC Brown’s UK-focussed portfolio will be the first to capitalise should it happen to turn a corner.
Indeed the duo are optimistic about the prospects for the rest of the year.
“We may have a change of government where Keir Starmer becomes prime minister and Rachel Reeves as the new chancellor, who’s an ex-Bank of England economist and has a reasonably good reputation with people in the City,” said Meyer.
He said Reeves may bring a safe pair of hands to the financial sector and that economic stability could be key in encouraging overseas flows back into the UK market, while adding that the opportunities are ripe for active managers to thrive in such an environment.
“It's been really tough,” he said. “Those people who are willing to go out and keep turning over stones are sooner or later going to find some real gems, real things that have great potential. But when will that be delivered in terms of performance? I don't know. So I think you have to be prepared to be at least medium term, but preferably long term, in your investment horizon.”
