‘Navigator’ is the term used for someone who is responsible for the path or journey of a vessel or aircraft and the science around ensuring it gets from place to place, and to its eventual destination, safely. As such, Clarion’s new fund name fits well with the medium to long-term objective to provide a balance of capital growth and income over a recommended minimum holding period of 4 years.
The Navigator Fund will complement Clarion’s existing fund range of Prudence, Meridian and Explorer and will sit between Prudence and Meridian on the risk rating scale.
The Navigator Fund will aim to have around 60% of the portfolio invested in equities, all through equity-based collective funds. Our current tactical allocation has this exposure standing at closer to 65% which reflects our current viewpoint of being slightly overweight equities on attractive valuation grounds and to ensure participation in the recovery currently being seen in financial markets. This will mean that the new fund will be placed in the IA Mixed Investment 40-85% shares sector. The Fund has been designed on the current model portfolio D which has been in existence for the past three years and which has recently been recoded Navigator.
The portfolio is appropriately diversified across a range of high quality ‘growth’ and ‘value’ equity strategies mixed with shorter dated bond strategies. We retain an underweight allocation to traditional bonds as we continue to believe that duration risk is unattractive, preferring bonds with shorter maturities. Within equity markets we continue to hold higher weightings in the UK, Asia and Emerging Markets in line with the risk level of the portfolio, based on more attractive valuations.
The spread between yields on government bonds and equities remains considerable, particularly between Gilts and UK equities, even after allowing for a significant number of FTSE 100 companies reducing dividend payments. We remain confident of the potential upside in equities, particularly from countries that have managed to suppress Covid-19 successfully. As such, we have an overweight position in Asia Pacific and Emerging Markets.
We remain cautious on the prospects for Bonds particularly at the longer end of the yield curve. The scale of fiscal stimulus, and the opportunity for the government to borrow far beyond electoral and economic cycles at historically unprecedented low interest rates, will inevitably prolong bond market distortions and could eventually lead to a large-scale downward re-pricing. We maintain the rationale that the shorter end of the bond market offers an appropriate risk/reward ratio for our investors, without sacrificing income.
The current portfolio breakdown is as follows:
BlackRock UK Equity 5%
CFP SDL UK Buffettology 5%
Vanguard UK All Share Index 7%
UK Equity Income
Man GLG UK Income 5%
Franklin UK Equity Income 5%
Fidelity Index US 5%
Fidelity European 4%
JPM Japan 4%
FundSmith Equity 5%
Artemis Global Select 5%
Hermes Global Emerging Markets 3.5%
ASI Emerging Markets Income Equity 3.5%
First State Asia Focus 4.5%
Fidelity Asia 4.5%
Investment Grade Bonds
L&G Short Dated Sterling Bond Index 9%
Vanguard UK Short Term I/G Bond Index 4%
Royal London Sterling Credit 5%
Royal London Global Index Linked 6%
High Yield Bonds
Baillie Gifford High Yield Bond 5%
This breakdown is constantly reviewed by the Clarion Investment Committee with changes made to both the asset allocation and fund choice as and when considered appropriate by prevailing investment and economic conditions.
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