From the sublime to the ridiculous

JEFF SALWAY

BILL MCQUAKER'S three years at the helm of the Henderson Income and Growth multi-manager fund has been characterised by two distinct periods.

"The fund was launched in a bull market and performance was driven by exposure to riskier assets," said McQuaker. "Since the last quarter of 2007, however, the environment has changed and we have been less confident in those assets, so we have reduced our equity exposure significantly."

The shift from high-risk assets has accelerated in recent weeks. "We moved defensively about a month ago to reduce our equity content by using derivatives," explained McQuaker, who had previously ramped up exposure to investment grade bonds with the addition of the Old Mutual Corporate Bond fund.

The flight to caution hasn't meant a total withdrawal from risk and adventure, however. "We have still made some counter-trend plays," said McQuaker. "When we witnessed an aggressive market sell-off earlier this year, for instance, we took the opportunity to put some risk back into the portfolio and take advantage of valuations."

Although McQuaker, head of the multi-manager team at Henderson, is fairly optimistic that the equity market sell-off that began in mid-May could be nearing an end, he doesn't think a broader improvement is on the cards yet. "The last four or five years have seen some unprecedented growth globally, but that has now run up against some meaningful constraints."

Ranked ninth of 134 funds in the cautious managed sector over three years, the fund is obliged to hold at least 50 per cent in sterling denominated investments. But its exposure to the UK is among the lowest in the sector, primarily due to currency concerns.

"It hasn't been an area of tremendous interest to us because sterling has weakened considerably in the last six to nine months, except against the dollar," commented McQuaker.

Aside from the UK, the portfolio includes funds in the US, Europe and Japan, while Asia and the emerging markets are also well represented. "There's still scope for opportunity in Asia with inflationary pressure potentially forcing some countries to allow their currencies to appreciate."

The manager's approach is based largely on maintaining diversification. "We're not dependent on either fund choices or asset allocation, but we try to add value in both areas," said McQuaker.

• The Henderson Income and Growth multi-manager fund is available as an ISA. The initial charge is 5.25 per cent and annual management charges are 1.5 per cent. For more information call 0207 638 5757.