Thesis Asset Management has slashed its exposure to technology and healthcare equities in an attempt to reduce risk across its discretionary portfolios.
The wealth management firm said it had reduced its holdings in the stocks and kept the proceeds of the sales in cash, rather than buying up other shares.
The global technology and healthcare sectors, which both sold off quite heavily in March and April, have since rallied.
In longer time periods, both sectors have substantially outperformed the wider global index, with healthcare funds among the best-performing funds in the IMA Global sector since the financial crisis. Matt Hoggarth, investment analyst at Thesis, said that this was because both are “driven by disruptive innovation” that comes in particular from smaller, growth-orientated firms.
The flipside of this high beta phenomenon, according to Mr Hoggarth, is that such sectors tend to underperform when the market falls. He added that, with their reliance on smaller growth stocks, the sectors had sold off because “demand in the markets rotated towards larger, more defensive stocks.”
Given the high beta of the sectors, Mr Hoggarth said, “They are a good target for equity reductions at a time when we are looking to lessen the overall risk of our portfolios”.
The discretionary manager has moved to a more defensive stance on its portfolios, given the high valuations in equity and bond markets and the geopolitical tensions currently in the market.
He added: “This is because the risk reduction per pound’s worth of equity sold will be greater than it would be for many other stocks.”
