Investment News & Views

Heritage Asset Allocation Update
May 2020

We have decided to make some strategic changes to the asset selection within our Heritage range of investment trust portfolios. We are doing this a little earlier in the year than we expected due to the change in dynamics emerging out of the Coronavirus crisis as markets stabilise and start their recovery.

Investment trusts tend to exhibit greater levels of volatility as compared to a corresponding OEIC. Our Heritage range in general suffered greater losses than their respective benchmarks over the past 3 months but have rebounded strongly.

The past 1-month performance to the 19th May 2020 is highlighted below:

Heritage Cautious 1.47% IA Benchmark 1.61%
Heritage Balanced 2.28% IA Benchmark 1.61%
Heritage Strategic 2.60% IA Benchmark 2.52%
Heritage Adventurous 3.03% IA Benchmark 2.52%

Within these performances there has been some particularly satisfying 1-month recoveries with 6 of our investments posting over 10% returns to the 19th of May such as The Fidelity Japan Trust + 12.59%, The Edinburgh Worldwide Trust + 17.16%, and The Scottish Mortgage Trust +17.87%.

With China now further ahead of other economies emerging from lockdown, we wish to take a direct holding in the Chinese economy rather than a broader emerging markets position. Therefore, we have reduced our emerging markets holdings and added a Chinese specific investment trust to our portfolios. We have reduced our exposure to Japan due to expectations of a prolonged recession and redirected this capital to a technology focused investment trust. The real winners emerging from this crisis are the big tech companies like Amazon, Microsoft and Zoom. Internet shopping is hitting an all-time high as is internet use. We have broadened our tech and US exposure with the inclusion of a US growth investment trust, which similar to The Scottish Mortgage Trust, has a tech bias. We have balanced our equity exposure toward larger corporations and away from smaller company holdings as we emerge from the debris of Covid-19. We have also replaced some of our funds due to performance with investment trusts that have a similar geographic and fund objective.

As far as our bond holdings are concerned, we have maintained our exposure to investment grade bonds, UK gilts and US Treasuries but have changed the emphasis away from short dated credit to longer dated. There is greater protection in longer dated credit markets and currently there is little threat of rising interest rates or inflation. We have therefore doubled our exposure to UK investment grade bonds at the expense of UK short dated investment grade bonds but maintained our global investment grade holdings.
We believe this re-positioning of the portfolios will advantage investors.

  • Thursday, May 21, 2020

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Tomiko Evans

Chief Investment Officer

Tomiko is Chief Investment Officer of Crossing Point and holds the IMC qualification for Investment Management.