The UK election outcome has led to inevitable outpourings of investors wary of uncertainty becoming commonplace, but what about those who positioned for an unpredictable outcome?
Fund selector: Andrew Harradine
Company: EFG Asset Management
Before major events we would do scenario testing on our portfolios and look at how they would perform given different outcomes. So, even with the relatively unexpected outcome of the Conservatives losing the majority, we had factored that into our portfolios.
So, in our sterling multi-asset portfolio there was an existing underweight to sterling and so, given the market action, sterling has weakened which means our positioning has performed well and is out-performing, which is exactly what we were looking for.
Now, with the situation playing out we would expect further sterling volatility to continue over the rest of the year and so we will maintain that underweight. We think there is scope for another election – most likely in the fourth quarter – and also scope for leadership change.
In terms of our equity exposure, when we construct a portfolio we look at the combination of passive and active. In this environment, active management will be under pressure, with the domestic FTSE 250 names under-performing, so we expect our passive exposure to do better than the active funds over the short-term.
We are not looking to make any major asset allocation changes and will continue to benefit from sterling under-weight as the UK economy comes under pressure. We are also underweight the UK as a whole and the likely slowing of capex spending will only harden that stance.