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7IM moves to active strategy now “easy money” made

29 January 2018

Seven Investment Management (7IM) has significantly increased its exposure to active management across its multi-manager fund range, noting that much of the “easy money” may have been made as we approach the bull market’s tenth year. 

7IM previously trimmed its active management exposure in 2016 in favour of passives, but chief investment officer Ian Jensen-Humphreys said 7IM has “never been a passive house” but a “full solution house”.

He said: “At a time when the ‘active versus passive’ debate rages on, we have always actively embraced both, tilting each style to match our views at the time. But whilst we’ve never nailed our colours to the mast in the ‘active versus passive’ arena, we have tried to accommodate different needs in our different product ranges.”

The firm said the stage is now set for active managers to demonstrate their strengths, following a period of Quantitative Easing which saw passives and large caps benefit.

Tony Lawrence, investment manager, 7IM, explained: “As Central Bank policy returns to normal, this should tilt the balance back in favour of active managers. Our decision to trim our active manager exposure in 2016, a particularly tough time for active managers, has proved a good call over the last couple of years. But conditions now merit more active positioning, so we have been cutting our passive exposure.

“The hunt for yield in a low interest rate environment has also led to a huge focus on big, stable dividend paying stocks, which have soared. Many of these defensive growth stocks do not have much more growth capacity in them and they are now priced for perfection when many are far from perfect – some are even borrowing money to pay their dividends.”

Lawrence added that when the firm goes active, it “will really go active, using contrarian, high conviction managers with a focus on valuation.”

Damian Barry, senior investment Manager, 7IM, added: “It may appear counter intuitive to increase active exposure at a time when the bull market is approaching its tenth year and much of the ‘easy money’ may have been made. But as the market becomes more discerning, with valuations increasingly stretched, that’s entirely our logic.”

7IM said its UK line up reflects its increased conviction in active management. It has added Artemis UK Select and Polar Capital UK Value Opportunities Fund across its multi manager range. Threadneedle UK Extended Alpha has been added to 7IM Moderately Cautious Fund and 7IM Balanced Fund.

The firm said current themes in the multi manager range include strong franchises, recovery plays and ‘hidden gems’ with strong valuation support in out of favour sectors.

 

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