Opportunities abound despite Brexit uncertainty
The current market cycle has further upside to enjoy, with the opportunity for investors to pick up "great UK companies at crazy prices" as Brexit-related uncertainty continues to dampen valuations, according to the Wise Funds' multi-manager team.
Traditional value funds feature strongly in the £52m TB Wise Multi-Asset Growth portfolio, with Aberforth Smaller Companies, Man GLG Undervalued Assets and Polar Capital Value Opportunities as the top three holdings.
Wise Funds portfolio manager Vincent Ropers (above left), who works alongside Tony Yarrow (centre) - founder of the boutique - and Philip Matthews (right), said while the team is neither positioned deliberately for a deal, no-deal or half-deal Brexit outcome, it is taking advantage of the "tremendous" value presented by the UK market.
Given the trio's confident views, their portfolio is heavily tilted to equities. Ropers said: "We think we are late cycle, and are still constructive on growth. Global growth is slowing certainly, but we are not at the end of the cycle yet. There are opportunities around, but you probably have to work a little harder to find them."
Noting the geopolitical headwinds facing investors around the world, Ropers said risk and volatility would exist anyway, given their point in the cycle. He added, however, issues such as the US-China trade war and Brexit "were not helping".
"We have a large allocation to equities in general, but we also hold more defensive strategies to allow us to navigate this extra volatility, such as 10% in absolute return, 5% in gold, plus some exposure to utilities and infrastructure trusts. These can grow nicely over time, but also provide some downside protection, which helped in Q4 last year, for example."
Tackling the US-China trade dispute, Ropers believes a deal will be done. It will take time and "will not be ideal", but he said removing the uncertainty will reassure investors and allow them to start to consider the investment prospects in China once again.
The team initiated a position in Fidelity China Special Situations in January to take advantage of the cheap valuations on offer, given China significantly underperformed the rest of the world over the previous six to 12 months.
"The government stimulus is starting to come through, which has been closely targeted at the domestic economy and domestic consumption," said Ropers.
Meanwhile, Ropers added the team is keen on exploiting the advantage gained from being an early investor in vehicles. He explained they are very comfortable seeding portfolios or early participation in funds, as that is when the managers' appetite is stronger.
Wise Funds was an early backer of Miton Global Infrastructure and Pacific G10 Macro Rates, and also participated in three investment trust IPOs in 2018: Mobius Investment Trust, AVI Japan Opportunities and UK small-cap vehicle Odyssean Investment Trust.
Ropers said: "We already knew all three managers so had existing relationships with them and we know they would want to make it work. All managers want their funds to perform at all times, but it is at the start of the life of a fund that you get the most of their hunger."
Over three years to 31 March, the TB Wise Multi-Asset Growth fund gained 50.1%, versus the IA Flexible sector average of 25.9%. Over six months, the fund lost 0.4%, compared with the peer group's decline of 2.4%, according to FE.