Gam pivots to less volatile asset classes

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Gam pivots to less volatile asset classes

Gam’s discretionary team has trimmed some of the equity exposure in its model portfolios and turned to less volatile asset classes instead, as market volatility persists.

Gam investment director Charles Hepworth said that in the £287m Gam Star Balanced fund, equity exposure has been reduced from around 70 per cent a year ago to nearer 60 per cent.

The proceeds have been placed into what the team perceives to be safe havens, according to Mr Hepworth.

He said: “Our equity exposure is around 60 per cent and it has been a lot higher. We have recycled that into fixed income, absolute return and alternative investments such as private equity and property.”

As of August 28, the portfolio had a 2 per cent holding in the Pareturn Barwon Listed Private Equity fund, a 3 per cent holding in Alken Absolute Return Europe, and 3.1 per cent in the Old Mutual Global Equity Absolute Return fund.

However, at a time when markets are being dogged by fears of a Chinese slowdown, Mr Hepworth is taking a more positive stance. He predicts the country’s economy will begin to show improvements later this year.

He said: “We do expect that Chinese GDP needs to start budging up in Q4 back to near 7 per cent. That would give some confidence to the market that things aren’t as apocalyptic as commentators were saying.”

His comments come as the Chinese economy continues to be hit by negative statistics.

Earlier this month, the Caixin Flash China General Manufacturing PMI, which reflects industry activity, hit a 78-month low.

Gam portfolios have not escaped the pain suffered in markets at the end of August, when the Shanghai Composite index lost 8.5 per cent in one day, but Mr Hepworth is untroubled by these events.

In a September update for the Gam Star Balanced portfolio, Mr Hepworth and investment manager James McDaid said: “[We] remain fundamentally positive on the outlook for European economies and unfazed by events in China.

“Unsurprisingly, the Gam Star Asian Equity fund had a large drawdown of 11.8 per cent. The fund has a high weight in Chinese and Hong Kong stocks, and suffered as a result.”

The Gam Star Asian Equity fund makes up 0.9 per cent of the Balanced portfolio.

Mr Hepworth, meanwhile, is positive on Europe, which makes up 25.9 per cent of the portfolio, being bullish on the effects of quantitative easing from the European Central Bank.

The manager is also upbeat on Japan, with the Coupland Cardiff Japan Alpha fund making up 6.6 per cent of his Balanced fund.

But he has reservations about North America, which comprised 15.2 per cent of the portfolio’s exposure at the end of August.

“The US consumer’s recovering [and] I think the GDP figures are underreported [and] valuations are quite stretched,” Mr Hepworth said.