Bankers (BNKR ) is slimming down its global equity portfolio to focus on its best ideas following a strategic review.

The £1.3bn trust run by Janus Henderson’s Alex Crooke used its half-year results to set out the changes following the strategic review it undertook after its particularly poor performance in 2023.

Although returns have overshot the FTSE World index in the six months to the end of April, with a net asset value (NAV) total return of 17.5% versus a 16.6% rise in the benchmark, Crooke has started to pare back and consolidate his holdings.

The portfolio has grown the number of stocks and regions it is invested in over the past decade and, despite offering greater diversification, has met ‘conflicts’ given companies can be dual-listed and mergers and acquisitions change the dynamic of sectors.

This has led Crooke to consolidate the number of regions he invests in to four: North America, Pan Europe (including the UK), Pan Asia (excluding Japan), and Japan.

‘We will continue to invest directly in the UK and Chinese markets but with a single investment team overseeing these regions with greater scope to invest more capital in the best companies across wider regions,’ he said.

Jamie Ross, under the supervision of Crooke, will manage the Pan European portfolio and Sat Duhra will manage the Pan Asian portfolio. Ross was named deputy of Bankers following the recent retirement of Mike Kerley.

The decision was also made to concentrate the portfolios as smaller holdings were not improving performance.

‘We therefore intend to increase the amount of capital in our best ideas by reducing the number of holdings towards 100,’ Crooke said.

‘We will target regional portfolios of 20 investments, with slightly more in the US as it is a market with significantly more listed companies and therefore investment opportunities. We expect the tighter concentrated portfolio to be substantially implemented by the end of October 2024.’

Zero-yielders

The start of the consolidation process has not stopped Crooke from making additions to the trust over the six months, in particular his exposure to technology, which has risen from 16.3% to 22.3%.

Crooke added zero-yielding US technology giants Alphabet, Amazon and Meta, after strong results showed the reduction of costs from closing loss-making divisions and increased revenues had resulted in strong margin performance. Alphabet and Amazon now sit in the top 10 holdings of the portfolio, making up 1.8% and 1.6%, respectively.

However, these technology additions did not make up for the lack of exposure to chip giant Nvidia, which meant the US portion of the fund lagged its benchmark.

The fund is exposed to semiconductor manufacturing in Japan, the US, Asia and Europe, but ‘Nvidia is garnering all the exposure and investors are chasing returns’.

‘Undoubtedly, [Nvidia] is the leader in developing artificial intelligence chips, but we do have concerns that new orders will start to plateau, leading to pricing pressure, ultimately impacting its share price,’ Crooke said.

The Japanese portfolio outperformed its benchmark by nearly 5% thanks to a recovery in financials as the Bank of Japan raised interest rates for the first time since 2007, ending its period of negative rates.

‘The yen weakened over the period but the stock market recovery more than made up for this, delivering a total return of 20.2% over the period,’ Crooke said.

The European, Asian and Chinese portfolios also delivered returns in excess of their benchmarks, he added.

Crooke said he was ‘excited’ to invest more in his best ideas and that the focused portfolio would take advantage of the positive messages he is hearing from companies about improving orders, restocking and margins. On top of this, falling inflation and impending interest rate cuts should create further tailwinds.

‘The overall outlook is more positive than six months ago and should support the increase in share prices we have seen this year.’

This includes a 21.5% increase in Bankers’ share price that has shrunk the discount to 12.6%. The positive half-year results has also helped boost longer-term performance of the trust, and the NAV is up 20.7% over the past three years while the shares have gained 5%.