The past quarter proved to be a challenging one, with stock and bond markets around the globe experiencing a sell-off.
We were pleased with the way our funds held up versus their peers, however, and we used the volatility to add to equity holdings at lower valuations.
One particular theme, across most of the portfolios, was our participation in a number of investment trust placings.
It has been a particularly busy time for new launches and addition raising. As trusts have looked to raise capital, we've been able to invest in the new shares, at some attractive price levels.
We also invested in the Smithson IPO: we like Terry Smith's (pictured) open-ended fund and this trust should be able to invest in the smaller company opportunities that FundSmith Equity is now too big to contemplate.
The VT Chelsea Managed Monthly Income portfolio saw the most changes.
The equity weighting was already quite low, so we used the opportunity created by the October falls to add a position in Montanaro UK Income. This fund is very different from many of its peers, as it invests mainly in small and mid-caps.
The smaller end of the market has been hit quite hard, so we felt it could be a good entry point. We've also got an eye on future dividends: the 4.5 per cent yield on our portfolio is a nice level, but we want to make sure it will increase in future, so are looking to invest more in funds that specifically target dividend growth.
Holdings in Fidelity Global Enhanced Income, M&G Global Dividend and Premier Global Infrastructure (which we added the previous quarter), have also helped cushion the portfolio against some of the market falls.
Our short-duration bond exposure also meant that the fund was only marginally impacted by the US Federal Reserve's more hawkish comments at the end of September, and the subsequent spike in yields.
In the VT Chelsea Managed Balanced Growth fund, we initiated a holding in Natixis H20 – a global macro absolute return fund that has low correlation to other assets. It can be volatile, however, so the position we took is relatively small.
In the VT Chelsea Managed Cautious Managed portfolio we divested some 'trend' funds that just were not working as we had hoped.
The VT Chelsea Managed Aggressive Growth fund was left relatively untouched, but we have spent some time discussing the growth versus value conundrum.
In the UK and Japan, value has started to outperform in the past month, which has meant strong performance from our Jupiter UK Special Situations, JOHCM UK Dynamic and Man GLG Japan CoreAlpha holdings. However, growth still dominates in the US and Europe.
If we are about to see a long-overdue rotation, we would want a higher weighting to global value in the portfolio, so are considering our current weightings to Schroder Global Recovery, Artemis Global Income and Investec Global Special Situations. The next few months could be vital, as substantial gains can be made in the early days.
