Asset Allocator’s carrier pigeon (he’s a busy fellow) made a short trip to Quilter’s office and has returned with the latest update on the company’s Wealth Select models.

On the equity side of the book, Quilter reshuffled its US exposure, reducing positions in the large cap themed Quilter US Equity Growth fund, which is run by JP Morgan, and the iShares North American Equity Index strategy, both of which are tech heavy. 

Quilter has also switched the capital into its US Equity SMID strategy, run by Schroders; the Quilter North American Equity fund, run by the value-focused folk at Jupiter Merian; and the Newton-run Quilter US Equity Income fund. 

Elsewhere within the equity bucket, it has increased exposure to the Quilter Japanese Equity fund, which is run for Quilter by M&G.

This increased exposure is centred on Quilter’s managed and responsible models, and means the Japanese equity market is now one of the largest overweights across all of the portfolios. 

Quilter says this reflects the increased attractiveness of that market, particularly in an economy where inflation, and so interest rate, worries don’t exist.

Our Allocations database indicates that Quilter’s Japanese equity exposure is bang in line with the peer group average of just over 3 per cent, and this average hasn’t moved much throughout 2023, despite the optimism around the asset class from many market participants. 

The Japanese equity desk at M&G runs the M&G Japan fund, a strategy that has gained considerable traction among the allocators we cover, with a net of three new buyers in 2023. 

But the team have decided to blow a raspberry at falling bond prices by upping their fixed income exposure, specifically by increasing the holdings in gilts, bringing them back to a position where there is an equal weighting to UK and global government bonds.

This was funded by a reduction in Quilter’s chunky cash allocation and exposure to alternative investments. 

Manager Stuart Clark says this increase is simply a function of falling prices.    

The increase can be seen in the context of the Wealth Select portfolios being starkly underweight fixed income coming into the quarter. 

Their exposure across the asset class, at 14 per cent, was almost precisely half that of the peer group. And within that 14 per cent, the exposure to government bonds, at 5 per cent, was underweight to the sector average of 7 per cent. 

A hallmark of the Wealth Select portfolios has long been the chunky holding in cash, at 7.3 per cent, while the peer group average is 4 per cent, though as mentioned some of this cash has now been deployed to government bonds. 

david.thorpe@ft.com