Seven Investment Management has ramped up exposure to Asian equities at the expense of emerging markets as part of a raft of changes in its multi-asset portfolios.
The £75.4m CF 7IM Adventurous fund now has 15 per cent in Far East ex-Japan equities – up 9 percentage points from the previous quarter.
Its less risky funds have also seen exposure to Asia rise by 1 to 6 percentage points, depending on the mandate.
Justin Urquhart Stewart, co-founder of the group, said this has been funded by the exposure the funds had to emerging markets, which are now an underweight. The same weightings have been taken out of emerging markets and added to Far East ex-Japan.
He said: “Asian markets still look attractive. In the main, they are commodity importers in an era of low raw materials prices, with global growth beginning to improve and company earnings rising, too.
“In contrast, countries such as Brazil, South Africa and Australia look vulnerable to lower prices for their exports. We feel reasonably certain that any slowdown in China is being managed by the government, and in any case should be partly compensated for by Japan expanding once more.”
Mr Urquhart Stewart said his Asia exposure excludes Australia, meaning the funds gain more exposure to markets such as China, Hong Kong and South Korea.
The multi-asset funds have moved further overweight equities. The underweight to UK large-cap equities has been reduced, and the funds are now neutral on US equities.
“There are other more attractive regions, but the US economy is still a driver of growth, and stocks should benefit,” the manager said.
He added he is overweight European stocks, with roughly half of the positions in banks, given the stimulus announced by the European Central Bank will be carried out through the banking system.
“Low interest rates should work wonders for profit margins, and there is still a lingering fear factor that leaves them under-owned,” he said.
Mr Urquhart Stewart said he remains roughly “triple overweight” Japan, although he has moved to an unhedged position “for the first time in a number of years”.
“We believe the yen may hold its own for a while, having weakened considerably over the past few months,” he added.
In fixed income, the manager said he had previously been able to find opportunities in peripheral European government bonds, but that this trade now “looks stretched”; he has cut his allocation entirely.
Global government bonds had made up 5 per cent of the Cautious fund, which also had 3 per cent in index-linked gilts. This has also been removed.
