Caspar Rock takes whole of market approach to stockpicking for Architas MM range
Caspar Rock has over 22 years of investment management experience in various sectors of the industry, having managed funds focusing on core equities, global technology, and healthcare.
His fixed income experience includes convertible bonds and government bond arbitrage.
He works in Architas’ investment team as deputy chief investment officer, supporting chief investment officer Richard Philbin. The team is responsible for a range of multi-manager vehicles, including Architas Multi-Manager Balanced, Cautious Income, Income, Growth, and Dynamic funds.
How would you describe your investment process?
The philosophy is to add value through manager selection, asset allocation and style tilt while using diversification technique to control overall portfolio risk. We identify different sources of alpha, and the level of risk for each multi-manager fund is controlled by staying within the range defined by the Distribution Technology risk model. This gives me latitude to take asset allocation decisions, but in a controlled way.
It is a whole-of-market approach, which means I can invest in any fund that has a proof of sale in the UK. This is unlike other multi-manager products Architas runs, such as the Winterthur Elite funds, which are driven purely off the tailored selection list Axa Winterthur Wealth Management has.
I run two pure equity funds – Multi-Manager Dynamic and Multi-Manager Growth – which have a shortlist of holdings compared to the others. The ones with a longer list are the Multi-Manager Balanced and Multi-Manager Income funds, which have exposure to more asset classes and specifically different parts of the fixed income space. The Multi-Manager Cautious Income fund has just fixed income exposure but it does include some convertibles.
What have been the main performance drivers of the past 12 months?
Stock selection has been a key driver. We have had a number of very strong holdings within our UK equity exposure; in particular I would highlight the Standard Life UK Equity Unconstrained fund, run by Ed Legget, as a real standout performer. We have held it for a considerable period of time and it remains a reasonable weighting.
Standard Life UK Equity Unconstrained is a substantial weighting in the Dynamic, Growth and Balanced funds. In the fixed income space we have had very good returns from the Investec Emerging Market Debt fund and a few of the credit funds we own, including Cazenove Strategic Bond, Henderson Preference & Bond and Old Mutual Corporate Bond.
What are the most significant asset allocation calls you have made over the last six months?
We have been taking back our Asian and emerging market weightings in the Multi-Manager Growth fund. What is interesting is that the peer group have been raising theirs aggressively, so relative to the peer group what was an overweight position has become an underweight one where we have only reduced it slightly. The peer group has been substantially raising their weighting to that exposure in the last six months.
Other substantial moves have been to lower exposure to Japan and then more recently we have raised it again. We think Japan is an interesting diversifier and it has become remarkably cheap.
Have you made any other significant moves in recent weeks?
We added Neil Woodford’s Invesco Perpetual High Income fund in April to try and dampen the beta of our overall equity portfolio as we are becoming more cautious on the market. We were hopefully trying to presage a change in the investment environment, which I think it has done actually. The concern was that we had too much beta in our portfolio with quite a lot of small-cap exposure. Small caps have done remarkably well, and are still way ahead of large caps in the UK year to date. But we felt to try and diversify the holdings we wanted to reduce the bets in those two factors – small caps and beta.
How are the funds positioned?
At the margins we are more interested in Japan. We are intrigued by continental Europe. Everybody is underweight – nobody has got a good thing to say about it. A weak euro does mean one good thing which is that the German exporters are much more competitive, so we are doing some work around this at the moment.
Are there any other strong themes?
Within fixed income we continue to have a decent weighting to credit. We probably have less high yield than our peers, which until the last couple of weeks has hurt us on a relative basis. The high yield we are in tends to be crossover credit - the ‘fallen angel’ conservative area of high yield – and what has really performed up until recently has been the riskier end of high yield. But I am just happier owning conservative high yield, especially in mixed asset funds where you have a lot of high yield already.
Do you think investors should still be looking at multi-manager funds?
I think they provide a very good service for a particular segment of the market. They provide good diversified asset allocation and add value relative to the peer group in the medium-term performance. There are good elements of risk control which a multi-manager brings, such as diversification of risk control which you are less likely to get through a single strategy. It gives you a lot more flexibility. So I do think there is a place in the market for multi management. You can see this in how it is being used more and more widely in the distribution model people are using.
How will the funds develop?
I see some good opportunities but there are not as many clear asset allocation calls as there have been in the past. We have been tampering with some of our positions. We have taken back our overweight in Asia over the past 18 months. Over the medium term I am still bullish on Asia but right now there is very little visibility on most asset classes.
I continue to be very positive on emerging market debt. I think it is a very interesting asset class as a group, and under-recognised by the wider investment community as a great diversifier to portfolios. I think there is real opportunity in emerging market debt.
From an outlook point of view, it is not as clear as it was but there are a lot of cheap assets out there. There are times when you have to take a little bit of risk, and we are doing it in some specific areas but there are no real stand-out clear opportunities. It is about being selective in what you are doing.
