There may yet be troubles ahead despite the recent market recoveries, but the investment chief of UK firm Heartwood Wealth Management is in no hurry to stop patiently building exposure to risk assets such as equities.

Noland Carter, chief investment officer of Heartwood, said the firm has been steadily increasing holdings of equities and other select risk assets since 2008. Even though markets have rallied strongly over the past 12 months and more recently entered a more “normalized” phase, Carter is not looking to pare back on his holdings any time soon.

“From June to the end of 2009, we kept going into risk assets. We are now prudently overweight equities and there is still further scope for equities to keep rising,” Carter told this publication recently.

Heartwood's model balanced porfolio has delivered returns of 47.2 per cent in the five months to the end of March this year, beating the APCIMS Balanced index, at 38.2 per cent, over the same period. Its cautious style has delivered returns of 46 per cent over that period, against one-month Libor, at 22.7 per cent.

At present, Heartwood is overweight corporate credit, commercial real estate, and equities (with a bias towards emerging market stocks). The firm has also built holdings among hedge funds, but is currently not in private equity for mainstream portfolios, as it considers valuations and the market environment to be opaque, and is not exposed to commodities, Carter said.

Heartwood’s move into equities is hardly unique, of course – many strategists at wealth managers have taken a similar course, emboldened by relatively cheap valuations, huge injections of cheap central bank money and meagre returns from cash.

But not all wealth managers avoided a big loss in 2008 when markets tanked – but Heartwood managed to dodge the worst of the bullets in that year, Noland said (although he is the first to state that there is the wisdom of hindsight). Noland argued that his firm had acted swiftly ahead of the 2008 turmoil.

“We were relatively early in noting the over-valuation of most risk assets [prior to the credit crunch]. We said there was a massive issue coming up and began reducing risk in the second quarter of 2007,” he said.

“We went into the downturn with up to 50 per cent cash and short-dated bonds. It gave us an opportunity to sit back and think about what the next three to five years might produce. We decided to get back into the market because we concluded that we were not facing a depression,” he said.

Heartwood's clients include company directors, entrepreneurs, private equity partners, family offices, small pension schemes and professional intermediaries. As a discretionary manager running specific portfolios for clients, the firm does not publish performance figures. But Carter indicated to WealthBriefing that performance has, in general, been robust.  

Carter brings plenty of experience to a role he has held since 2008. Between 1999 and 2005, he was CIO of Barclays Wealth and and was CEO of Investment Services at that firm, and more recently, he has been CEO of Rothschild Private Management and Global chief investment officer of Rothschild Private Banking and Trust. Having worked at one of the world’s largest wealth managers (Barclays Wealth), he is enjoying the close relations with clients that come at a smaller outfit such as Heartwood.