John Husselbee, head of Liontrust’s multi-asset team, has taken advantage of the recent fears around Greece to “review and refresh” his bond holdings.
Mr Husselbee said the volatility in markets created by the concerns over Greece’s place in the eurozone had given him an opportunity to review his portfolios and deploy some of his cash.
When it comes to fixed interest, Mr Husselbee said markets were “in a place we’ve never been before in my career, with both interest rates and bond yields very low.
“We need to be well diversified to manage the interest rate risk,” he said.
To achieve this diversity Mr Husselbee has been favouring strategic bond managers, which he said had “really proven themselves” in volatile conditions.
He has invested in the TwentyFour Dynamic Bond, Kames Strategic Bond, and Aberdeen Strategic Bond funds.
The multi-manager said these strategic bond funds were best placed to combat the growing liquidity issues within the bond market.
Experts have warned there is an intense lack of liquidity in the bond market. Last month US Federal Reserve chairwoman, Janet Yellen, noted in a statement that valuations on “lower-rated corporate debt” were becoming “stretched”.
Mr Husselbee said: “We are in a strange place in the cycle where there is plenty of liquidity with quantitative easing, but there are tighter markets.
“Liquidity is a challenge, but these strategic bond managers have a wider remit and [therefore] a greater range of liquidity because of it.”
Elsewhere, the manager said he had been increasing his allocations to both emerging markets and Asia.
Mr Husselbee said the markets were “unloved” at the moment, with both sectors suffering precipitous share price falls in recent months.
But he said he is holding off committing significantly to these sectors until the Federal Reserve raises its base interest rate, at which point he thinks it will be “time to really go into the markets”, as he expects equities in emerging markets and Asia to react negatively to the rate rise.
Mr Husselbee said a US rate rise would point to a sustainable economic recovery, which could provide support for more “economically sensitive assets”.
Asia’s markets have suffered a volatile few months amid fears that the Chinese economy would experience a hard landing. China’s equity market saw its second-biggest fall in its history last week, sinking 8.5 per cent in one day.
Mr Husselbee said he had taken a cautious approach when it came to Asian funds, picking managers with lower beta. He opted for the First State Asia Pacific Leaders fund and the Schroder Asian Total Return investment trust.