Quilter’s WealthSelect shifts towards value-oriented equities

Quilter’s managed portfolio service (MPS) WealthSelect has implemented a “modest but deliberate” shift towards value-oriented equities in its latest quarterly rebalance.

Its team believed the continuing heavy concentration of market leadership, particularly within US mega-cap technology and AI-related stocks, meant the opportunity set was widening and markets were likely to become increasingly discerning.

This was expected to create a more favourable backdrop for active managers, value strategies, and selected small and mid-cap (SMID) opportunities.

Therefore, the team decided to reduce its passive US exposure in favour of increased allocations to value and SMID stocks.

The portfolios also implemented a slight tilt towards value in Europe, adding to the Quilter Investors Europe (ex UK) Equity Income Fund in the Managed Portfolios and Edentree European in the Responsible Portfolios.

WealthSelect’s Sustainable Portfolios saw a modest tilt towards value, which was imeplmented through greater exposure to the Lyrical GIVES and CT Sustainable Global Equity Income funds.

Value exposure in emerging markets was increased through the allocation to the Quilter Investors China Equity Fund in the Managed Portfolios.

Quilter said this reflected the fund’s more valuation-sensitive approach to portfolio construction and the value available in parts of the Chinese market when compared to other emerging markets.

There were no changes to the headline asset allocation in the WealthSelect Managed and Responsible Portfolios, with high-level exposures returning to their previous model weights.

This meant some equity gains had been locked in, alongside further profit-taking in the Managed Portfolios from gold, with the proceeds used to top up allocations to fixed income and alternatives.

Across the WealthSelect portfolios, exposure to passive gilts has been reduced in favour of active global government bond strategies as the Autumn Budget approaches.

Therefore, the allocation to the Quilter Investors Global Government Bond Fund has been increased in the Managed Portfolios, while the Aegon Sustainable Sovereign Bond Fund allocation has been increased in both the Responsible and Sustainable Portfolios.

“While market momentum has stayed strong, we remain mindful of elevated valuations in parts of the market, ongoing concentration risks within AI-related sectors, continued geopolitical uncertainty and the upcoming Budget,” said Quilter’s WealthSelect MPS portfolio manager, Helen Bradshaw.

“As a result, while we didn’t feel we needed to increase overall portfolio risk at this stage, we did want to refine some of the holdings and style tilts to help take advantage of these conditions.

“This concentration in equity markets, together with heightened volatility in bond yields, is creating a broader opportunity set for skilled active managers.

“In equities, it provides greater scope to add value through stock selection; in fixed income, managers can use their flexibility across duration, country exposure and yield curve positioning to navigate changing market conditions.

“While markets may continue to trudge on for now, there are still plenty of risks lurking beneath the surface. We want to make sure advisers and their clients are well placed to navigate any potential volatility, without overexposure to any one sector becoming their, or our, undoing.”

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