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Brooks Macdonald: US rate cycle the biggest risk out there

The number of risk profiles developed by bespoke wealth manager Brooks Macdonald has grown from one to 10. Jonathan Webster-Smith explains the investment process underpinning the model portfolio service he runs, as well as why he believes monetary policy is a driving force.

Brooks Macdonald: US rate cycle the biggest risk out there


Jonathan Webster-Smith has spent his whole career with Brooks Macdonald, joining as a graduate trainee and climbing the ranks to become investment team director. He oversees the firm’s managed portfolio service, something which he was integral to the creation of.

“I started with Brooks in 2001 as a graduate trainee and worked in a team including Richard Spencer, who is now our chief investment officer,” he says. 

“The firm only offered a bespoke service when I joined and I became part of one of those bespoke management teams. We identified there was a need for us to give people that had lower amounts to invest access to our full investment process.

“The managed portfolio was born out of that. The service has grown significantly in the professional adviser market, from the one risk profile we launched with to the current 10.

”The investment process underpinning the model portfolio service is driven by a combination of two committees. One of these is the investment committee, which looks after the governance side, ensuring everything is in line with the rules and regulations,” he says.

“Then we have the asset allocation committee I sit on. Our investment teams all have a particular sector responsibility, so as a manager I can then go and draw on the appropriate person,” he says.

Not-so-great expectations

The asset allocation for the model portfolios Webster-Smith looks after is in large part driven by monetary policy expectations.

“The US rate rise cycle is certainly the biggest risk out there at the moment,” he says. “If they get it wrong and choke off growth in the biggest economy in the world, it would become very difficult, not just for bonds but equities as well.

“I think we will see a couple of small rises that are more symbolic than anything, and then there will be a pause while they wait and see what the response is. “For our medium-risk portfolios, we very much believe equities are where returns are going to be derived from over the next three to five years,” he says.

“We focus on developed markets, with very low EM exposure, which has certainly been a positive this year. At the moment, we favour European and UK equities over the US. We like the UK market on valuation grounds, and with the backdrop of falling unemployment and favourable economic data.

“We still need to see earnings go up but when you have unemployment falling, that should start to come through as consumption increases.

“Liontrust UK Special Situations is our largest single holding and it has done particularly well for us,” he said.



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