Under the bonnet: The Global Established Portfolio - Equilibrium

New enquiries: 0161 383 3335
Existing clients: 0161 486 2250

Get in touch
Ask us a question


    Under the bonnet: The Global Established Portfolio

    We are often asked by our clients to provide more detailed views of our portfolio and to share our thoughts on what we look for when constructing portfolios. We have a number of tools at our disposal that allow us to look beyond the high level fund selection. We are able to see how the funds, and our portfolios, look underneath at the stock level.

    Our Balanced and Adventurous Equity Portfolios are constructed using a blend of five sub-portfolios; UK Conservative, UK Dynamic, UK All, Global Established and Global Speculative.  Table 1 sets out the performance of each of these. 


    Up to the end of June 2018, the Global Established has been our best performing equity portfolio over the past three years.  In terms of consistency amongst the portfolios over six monthsone year, three years and five years it falls second behind UK Dynamic which has returned the most over each timeframe with exception of three years. 

    Global Established funds currently make up 37% of the equity in our Cautious and Balanced portfolios rising to 38% of the equity in an Adventurous portfolio. As the name suggests this portfolio is made up of non-UK developed markets, we consider Global Established markets to be US, Japan and Europe.  We are in a globalised world so there is always some correlation between equity markets but Chart 1 below shows total returns can take different courses at times.  


    This broad universe offers a wide spectrum of investment opportunity and this portfolio contains more funds than any of our othersThe portfolio is currently a blend of five funds; Blackrock European Dynamic, Miton European Opportunities, Baillie Gifford Japanese Companies, Schroder Tokyo, and the Vanguard US Equity Index. The diversification of markets and range of funds available provides great opportunity to tactically position the portfolio on a regional and style basis (demonstrated in Chart 2). 

    We have been over our long-term strategic weight in Japanese equities for some time in the portfolio with both US and Europe accommodating this tactical position.  The Japanese position is split between the Baillie Gifford and Schroder fundswith both having very distinct styles (the former being more growth oriented and the latter having a greater focus on value)Table 2 below shows the breakdown of these funds, notice the large exposure to high growth technology and robotics names in Baillie Gifford compared to the more traditionally defensive positions in automotive and pharmaceutical stocks in the Schroder fund.   


    This construction gives us some comfort that when (as can be case) one style is out of favour, our portfolio will benefit from improved returns from the dominant style. This is not to say it is guaranteed that over short-term periods one fund will go up as the other goes down, but we envisage both funds to do well over the long term and the interaction over short term will generally reduce volatility within the portfolio.   

    Whilst we were, and remain, happy with our Blackrock European Dynamic (BR) investment, earlier this year we decided to diversify our European exposure. We invested in the Miton European Opportunities fund, which was on our radar for a little while, to reduce the large exposure to BR and to increase our European small and mid-cap exposure (‘cap’ is often used as shorthand for market capitalisation, so mid-cap refers to mid-market capitalisation or mid-sized companies).   

    Table 3 below compares the relative styles of the two funds using Thomson Reuters-style scores. Securities within the funds are scored for size and style using a range of -100 to 100, scores below negative 33 are considered small cap or value style and scores above 33 are considered large cap or growth style. Using this scoring system, we can see both funds have a tilt towards growth but the Miton fund has a greater emphasis on smaller and mid cap names.


    The move has been positive for performance with Miton European being our best performing equity fund over the six months to end of June. Despite weaker performance from Blackrock it is still encouraging that both funds have outperformed the broad European index over the past six months (see below in Chart 3). 


    Being able to look through our global portfolios with diverse investment regions and break them down over various factors gives us a good level of transparency into what we, and ultimately our clients, are investing in.   

    This insight into the areas that we may be over or under exposed within each region gives us a better chance of making positive investment decisions as we fine tune our portfolios to deliver efficient risk weighted returns.

    Click here to read ‘Under the bonnet: The Global Sepeculative Portfolio’

    Disclaimer: Past performance is never a guide to future performance.  The content contained in this blog represents the opinions of Equilibrium Investment Management. The commentary in this blog in no way constitutes a solicitation of investment advice. It should not be relied upon in making investment decisions and is intended solely for the entertainment of the reader.  

    string(4) "test"
    Group 6 Created with Sketch.

    In order to get the best viewing experience of this website, we recommend downloading one of the browsers below: