Premier Multi-Asset Funds: Investment update

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  • 06 mins 21 secs
Simon Evan-Cook, Senior Investment Manager, Premier Multi-Asset Team, discusses the team’s current views on equity and bond markets and how they are positioning the range of multi-asset income, multi-asset growth and multi-asset absolute return funds to deliver good outcomes for investors

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Premier Asset Management

Premier Asset Management

Tel: 0333 456 9033

Email: [email protected]

Web: www.premierfunds.co.uk

MIKE HAMMOND: Hello, my name is Mike Hammond, Sales Director at Premier Asset Management, and I’m joined today by Simon Evan-Cook, Senior Investment Manager within the Premier Multi-Asset team. Hello Simon.

SIMON EVAN-COOK: Morning Mike.

MIKE HAMMOND: As a multi-asset team, you’re managing assets across a wide range of different classes, but clearly equities are the predominant asset class that you own. So what are your views on the equity markets as we are today?

SIMON EVAN-COOK: It’s interesting time for equity markets. You sense a lot of nervousness out there given how long the bull market that we’re currently in has been going on for. As valuation-driven investors, our current view is that actually equity markets, they certainly don’t look cheap. You’d be lying if you were describing them as a bargain. But we think actually they provide reasonable value given the valuations you’re able to get, especially again compared to cash or to bonds where we think actually you’re really getting very poor value for money and in many cases actually making a real loss. So when we look across the asset class spectrum, equities for us seem to be the very best place to be. Not just for a capital return, which is what I guess a lot of people see equities as being their strength, but also on the income side as well. So not only have you got better valuations, you’ve actually got in a lot of cases high yields in the equivalent bond market too.

MIKE HAMMOND: So, Simon, turning to the bond market, we’ve obviously seen lots of press comments recently and obviously we’ve seen a recent increase in interest rates. So what are your current views on the bond market and why?

SIMON EVAN-COOK: We’re fairly cautious about bonds as an asset class. You’re right to highlight the speculation around interest rates because they’re very important to what the future path for bonds are. If you’re in long duration part of the bond market, which means typically longer to maturity, then there’s a risk that when interest rates rise that actually the prices of those assets get hit quite hard. Now, for us, that’s a concern. We don’t try and predict the direction or the size of interest rate moves and certainly not the timing of them, but what we can do is look at where bond markets are valued currently and see that actually because everyone believes that deflation is here and here to stay and inflation’s dead and gone forever, then actually there’s a risk that if that’s wrong and interest rates rise more than people are expecting, you actually achieve pretty steep losses from bonds. And that’s something we’re keen to avoid. The converse, you know, can interest rates be cut a long way from here, well clearly at ½% of the UK, there’s not that much further, or that much more damage that can be done on that side. So that’s the side that worries us so we’re generally positioned in quite a short duration way within our bond portfolio.

MIKE HAMMOND: Given that you just said that you’re cautious on bonds and that your positioning is short duration, what are you currently investing in?

SIMON EVAN-COOK: What we see really is to stay away from the most trodden paths which are gilts or other sovereign bonds like that. We see those as being particularly poor value. We like assets such as mortgage-backed securities and other asset-backed securities where we just think there’s still some value and some decent yields to be had. We’re growing more cautious on high yield bonds. Some of the quality of those is deteriorating but we still think with active management and we do use active managers we’re able to pick the best bonds within those markets and still achieve good yields and a good risk/reward trade off and other corporate bonds too. And to a certain extent although we’re moving away from it slightly, emerging market debt offers a level of opportunity too at the current time.

MIKE HAMMOND: Simon, if we look back at 2015, the team had a fairly significant overweight position in property, so what is your current view on property markets and how are you trying to access that asset class?

SIMON EVAN-COOK: As an asset class we quite like property. We think again the yields compared to assets like gilts and cash look quite attractive. But you do have to be very careful about how you access property given the liquidity. It’s obviously very different owning a giant shopping mall in London compared to owning some shares or some bonds which are quite easily tradable so you have to have the right vehicle for that. And so for us investment trusts are the best way of holding property assets. So our exposure is predominantly through those investment trust vehicles. And in terms of the types of property that we’re looking at, we’re looking at more niche areas as well. Particularly areas where we think there is a level of insulation against an economic downturn, they’re less cyclical so areas like healthcare, social housing, which have also a sort of quasi-government backing to them, are particularly appealing at the current time.

MIKE HAMMOND: Given everything that you’ve just said, how would you summarise the position across the range of funds that you manage?

SIMON EVAN-COOK: Obviously have a range of different outcomes that we’re trying to achieve so all the positioning will vary depending on that outcome. But if I had to describe it in one way across the whole suite if you like is that we are cautious but still invested. We think that we can still achieve the outcomes that we’ve set out for each of those funds and the best way is to be invested in order to do that. But we’re certainly not putting the foot to the floor at the current time. We think given where we are in the cycle that’d be a very dangerous thing to do. So where possible we’re looking to take a more cautious position across the funds.

MIKE HAMMOND: Simon, thank you very much for your time today, much appreciated. If you would like any further information on the range of Premier Multi-Asset Funds, please contact us on the details below, thank you.

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