Last November, Brooks Macdonald acquired Spearpoint, the Channel Islands-based fund manager, for £23.1m ($35.2m), which was seen as part of a continuing trend towards consolidation in the wealth management sector.
Boscher, an investment manager with 25 years of experience, had joined Spearpoint in 2007 as chief investment officer and manager of various funds and private portfolios.
With a background that included working in the 1980s for James Capel – a good name from the past – then Old Mutual and Collins Stewart, it would seem an easy transition across for him to CIO of Brooks Macdonald Asset management (International).
Model behaviour
Boscher says Brooks Macdonald’s bespoke approach to portfolio construction has “blended in easily” with Spearpoint’s asset allocation models, which provided a framework for its portfolio managers.
“We also have a list of approved investments, which is based on all investment managers having a research capability as well.”
Brooks Macdonald has approved investment lists and asset allocation guidance, which has upper and lower tolerance limits to give individual managers some independence in managing their clients’ money.
On the multi-layered risk front, sterling investors fit into one of five asset allocation models, ranging from low, low to medium, medium, medium to high and high risk.
For euro and dollar mandates, the international take allows for three models, covering low to medium, medium and medium to high risk.
The process breaks down further into specific client objectives of income, growth or a balance of both, at which point a dialogue around time horizons kicks in. Low-risk mandates have a minimum three-year time period and for all others it is five.
Risk assessment
All of Brooks Macdonald’s investment managers are given risk-rated guidance by asset class on the scale of 0 to 10. For example, UK equities might be anywhere between four and 10, depending on the vehicle or the instrument, while UK fixed income might be one to five.
These ratings are further broken down by market capitalisation, so a large-cap UK equity or fund would have a lower rating than a small or mid-cap one.
Currency risk has to be factored in too, and the wide universe of investments used to construct portfolios covers both on and offshore funds, direct individual stocks and bonds, passive funds and alternatives.
“Sometimes we are restricted as to which type of vehicle we can use, but more often than not we have flexibility and we can use the best available fund,” Boscher says.
“For more aggressive clients we will typically have a mix of direct equities, funds and some direct bonds. Small or mid-cap exposure and higher-yield bond exposure via funds, whereas large-cap equity exposure might come direct and corporate bond or government bond exposure might come direct or from a mix of direct and funds.
“In the alternative space, we would typically use funds, whether property, hedge, some structured return type of notes or products maybe, and then as well as that, the funds themselves would be largely open-ended but some close-ended as well.”
Team building
All the investment managers at Brooks Macdonald – who number more than 70 – have both client relationship and research roles. Teams have responsibility for a specific sector, such as UK stocks, with access to a mix of in-house processes and tools to look at quantitative issues and help with qualitative interviews.
The portfolio shown below is for a Brooks Macdonald medium-risk client with a Europe-weighted preference; similar portfolios are available in US dollar and pound sterling versions.
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This reflects the fact that clients are a mix of UK and global-based individuals, some of whom are expats, who have come to Brooks Macdonald either directly or through intermediaries.
Within the individual sectors highlighted, the thematic equity exposure is predominately invested in technology and global income stocks; alternatives exposure includes property-related investments, hedge funds, structured returns and commodities.
Boscher says the absolute minimum for this portfolio would be £250,000 but points out that, in reality, the typical portfolio size would be closer to £1m or equivalent.
This medium-risk profile means the range of equity exposure sits between 55% and 75%, depending on the house view at the time.
“At the moment we’re in the mid-60s, and that’s partly because we’re bullish on equities on a long-term view," he explains.
"We think equities are the best asset class to be in, but in the short term view they have done very well. The global economy and the US in particular might be going through a soft patch again, and we need confirmation that growth is going to come through in the second half of the year for equities to have the next leg of the equities bull market.”
This gives slightly lower equity exposure compared with six months ago, he says. With the European mandate, there is only 6% in the UK, and a typical investor’s portfolio is underweight Europe and the euro currency.
“We think the euro will weaken on a medium to longer-term view, and we have a strong preference for the dollar at the moment.”
Mixed market
As for the emerging markets, there is currently an Asia bias, and Boscher says there are mixed opportunities here.
“Some emerging markets are very cheap, the economies are sound and central banks can be quite accommodating, because inflation is not a problem. Some economies are also benefiting from falling commodity prices.
“Other emerging markets are close to the peak of the cycle. We think Chinese equities are offering very good value, whereas other markets, such as India and Russia, may struggle.”
Boscher likes Japanese equities, mainly because the central bank is pursuing such a major shift of expansionary policy that although Japanese equities have rallied very hard since November, he believes they have a lot further to go.
From a sector and theme perspective, meanwhile, in common with many asset allocators, one of the key areas he favours is global equity income, driven in part by the bond markets.
“It is difficult to argue there is much value in sovereign bonds," he says. "A lot of the money that would have gone into bonds is finding its way into quality equities.”
Technology is the other key theme for Brooks Macdonald but, notably, the firm does not currently have any dedicated commodities exposure.
Global outlook
As for the bigger picture, Boscher says the global economy has stabilised and is gradually repairing itself, but there is divergence as well.
“The global economy is still growing at a rate that’s well below its long-term trend," he says.
"Of the major economies, the US is in the best shape right now, and by the end of the year, will be closer to where most people would like it to be, whereas Europe is still mired in recession and likely to be there for some time.
"Inflation is still low despite all the quantitative easing, and central banks in the US and most parts of the world are still more concerned with falling inflation or disinflation rather than inflation.
"It’s a pretty supportive background for equities.”
