Value-oriented and small- and mid-cap (SMID) equities have been given a "modest but deliberate" increase in the latest rebalance of Quilter's WealthSelect MPS range, reducing passive US exposure in response to concentrated market leadership in mega-cap technology and AI-related stocks.
WealthSelect's managers have reduced their model portfolios' US passive weighting as they believe the opportunity set is broadening from the narrow band of stocks that have dominated the past few years, creating a more favourable backdrop for active managers, value strategies and SMID stocks.
The value tilt has also been applied in Europe, with WealthSelect adding to the Quilter Investors Europe (ex UK) Equity Income fund in its Managed Portfolios and EdenTree Sustainable European Equity in its Responsible Portfolios. In the Sustainable Portfolios, allocations to the Lyrical GIVES fund and CT Sustainable Global Equity Income have been increased.
In emerging markets, WealthSelect has raised its allocation to Quilter Investors China Equity within the Managed Portfolios. It said this reflects the fund's valuation-sensitive approach and relative value in China compared with other emerging markets.
There has been no change to headline asset allocation across the Managed and Responsible Portfolios, with high-level exposures returning to previous model weights.
This locked in some equity gains and prompted further profit-taking on gold in the Managed Portfolios, through the Quilter Investors Precious Metals Equity fund, amid moves in US bond yields. The proceeds have been used to top up fixed income and alternatives.
WealthSelect has also shifted further away from passive gilt exposure towards active global government bond strategies ahead of the Autumn Budget. The Quilter Investors Global Government Bond fund allocation has been increased in the Managed Portfolios, while Aegon Sustainable Sovereign Bond's allocation has risen in both the Responsible and Sustainable Portfolios.
Helen Bradshaw, portfolio manager of Quilter's WealthSelect MPS, said: "While market momentum has stayed strong, we remain mindful of elevated valuations in parts of the market, ongoing concentration risks within AI-related sectors, continued geopolitical uncertainty and the upcoming Budget.
"As a result, while we didn't feel we needed to increase overall portfolio risk at this stage, we did want to refine some of the holdings and style tilts to help take advantage of these conditions. In equities, it provides greater scope to add value through stock selection; in fixed income, managers can use their flexibility across duration, country exposure and yield curve positioning to navigate changing market conditions."