Portfolio Update

22 March 2022

RATIONALE

In our 8 December 2021 update we noted our Asia Growth Barometer had turned positive and the Chinese authorities were taking action to stimulate their economy via credit expansion. We initiated a small exposure via the Vanguard Asia ex-Japan ETF (VAE) which we subsequently increased on 28 February as we removed our remaining Fairlight exposure.

As you can see from the following charts, both the Asia Growth Barometer and the credit impulse have remained positive and then last week China made several positive announcements to “actively introduce policies that are beneficial to the market.” The combination of these factors combined with attractive valuations creates a positive tactical outlook for Asian equities.

We are looking to increase our exposure to Asian equities as our preferred emerging market (EM) exposure given we want to avoid Russia and other problem markets such as Turkey though this change still leaves portfolios underweight EM overall. Given a growing allocation and ongoing regional complexity to navigate we are shifting the exposure to a well-established active manager in Fidelity. Fidelity have one of the largest investment teams in the region and the Fidelity Asia Fund one of the best long term track records as shown below:

The headline fee of the fund is 1.16% however we have negotiated a rebate of 0.20% which reduces the total cost to 0.96% which is compelling for the above track record of outperformance.

The specific changes are outlined below. They do not impact the growth exposure of the portfolios which remain neutral within the respective risk profiles. However, due to Global Alpha Growth allocations of Sage and Janus, the overall equity beta (risk) is below neutral, albeit less so following the changes.

PORTFOLIO CHANGE

ASSET CLASS POSITIONING

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