Emma Wall: Hello, and welcome to Morningstar. I'm Emma Wall and here today to give his three fund picks is Anthony Gillham, Co-Head of Multi-Asset for Old Mutual Global Investors.
Hello, Anthony.
Anthony Gillham: Hi, Emma.
Wall: So, what's the first fund pick today?
Gillham: Well, the first fund that I want to talk about is the Bank of New York U.S. Equity Income Fund. Really interesting opportunity, I think, for this portfolio at the moment given where it's positioned. Valuation-orientated fund, but with an income overlay, which mitigates that value effect somewhat. So, it gives us some diversification. But what really interests me about this portfolio is the managers' financials positioning at the moment.
And I think really good opportunity given where banks are in terms of their levels of capital in the U.S. at the moment, but also a very interesting opportunity from a portfolio perspective. I think a decent allocation to banks, financials, in general, is very good to diversify fixed income exposure. Typically, I think, at the moment, as interest rates rise, we're seeing government bond position is under threat. But potentially, the banking sector is in a really good place to benefit from that. So, it gives us a nice good balance in our portfolios. So, a good pick for our customers.
Wall: And what is the second fund pick today?
Gillham: Well, the second fund I want to talk about is Wellington Global Credit. It's a fund that's actually been a stalwart of our portfolios for a number of years, but probably the way I describe this internally is the team over at Wellington and Global Credit really a bit of an alpha machine, something that's delivered from an alpha perspective consistently over the years. But the reason I'm highlighting it now is because I think, again, market opportunity is there.
We've seen a lot of spread compression in high-yield, so high-yield yields coming down. But where we've seen less yield compression is in investment-grade. And the Wellington Global Credit Fund really does focus on the investment-grade part of the fixed income spectrum. So, good relative value opportunity I think.
Wall: And that's I think an important point to make because bonds are rather unloved at the moment. They have been bashed consistently for the best part of 10 years. We've been waiting for yields to start coming up. But obviously, the longer we live it, the more likely it is to happen. However, they are still an important part of a multi-asset balanced portfolio, aren't they? If you're going to have portfolio diversification, which is going to give you less volatility, you do have to have a fixed income allocation?
Gillham: Absolutely. I couldn't agree more. And particularly, when you think about the potential for fixed income to hedge deflation, not necessarily my central case, but it's certainly something that when you are striving for portfolio balance and consistent returns, as we are at Old Mutual, fixed income still has a role to play. And I think an attractive way to play that at this current point in the cycle is investment-grade credit.
Wall: And what is the third and final fund pick?
Gillham: Well, my third and final fund pick is little bit closer to home. It's the Old Mutual Style Premia Absolute Return Fund. Very interesting, I guess, sort of market opportunity in terms of absolute return factor portfolio. So, it's a portfolio that looks from a quantitative perspective against – well, it looks at markets in a slightly way.
So, it looks at markets in terms of value exposure, growth exposure, momentum exposure, income and tries to aggregate stocks with those types of characteristics into one portfolio and then hedge out market risk. So, it's potentially a portfolio that can give us access to important market beaters but to do that in a market neutral absolute return type of fashion. So, very useful portfolio diversifier whilst still giving us exposure to equity factors.
Wall: Anthony, thank you very much.
Gillham: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
