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Investment trust portfolio: Refining value exposure

John Baron explains how the portfolios are balancing their exposure as sentiment shifts
Investment trust portfolio: Refining value exposure

With much talk in evidence of the rotation into value, investors will be forgiven for thinking little else has come to matter. Yet history suggests it remains wise to maintain portfolio balance. Market sentiment is often fickle and can distract. Remaining focused on the fundamentals of the investment, while relating this to one’s assessment of sentiment and long-term prospects, is key to the successful management of portfolios over time. And now is no different.

The portfolios have benefitted from their overweight exposure to growth companies. They will continue to seek the many entrepreneurial managements and companies which are embracing both existing and emerging trends and technologies. However, the last year has seen a reduction in the extent of this overweight position to ensure a better balance between the two approaches. The logic is well rehearsed.

The disparity in valuations between the two, the increasingly evident determination of governments to engineer a strong economic recovery, the prospect of artificially low interest rates and the concomitant risk of higher inflation, all point to those less fashionable but still good quality companies disproportionately benefitting. But maintaining a balance within this now larger ‘value’ component remains just as important as ensuring portfolio balance in general.

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