Brexit’s effect on global markets has meant the co-heads of F&C’s multi-manager team have used futures to protect the range of portfolios against further shocks.
Gary Potter and Robert Burdett - who have worked together in various firms since 1996 - said they have been using futures to hedge some of the range of portfolios against market shocks, but both believe it is right to “wait for the dust to settle” before making radical changes to portfolio positioning.
Mr Burdett said: “This latest market shake-up is a little different [to others we have seen over the past 20 years], as it is based around the uncertainty and the unknown of the future, rather than a specific event, such as the overvaluation of tech shares or the collapse of certain banks.
“I am not sure it makes it any easier to deal with but it certainly makes it different.”
Mr Potter commented: “Historically there will always be events that disrupt normality and in that sense this is just another issue for us to contend with.
“As Rob says, we have been through a number of crises before and we will go through more of these in the future. It is how you adapt to those conditions and how you adapt the portfolio to reflect the new normal that is important.
The currency markets are the deepest, widest markets in the world and they are also the most rigged. Robert Burdett “But it is also important to remember this is about long-term investing and despite the fact we have had a number of crises over the past 20 years, equities are still up 250 per cent and have outperformed bonds, so you have to stay the course.”
Post-Brexit, the team has been keeping an eye on positions across the range of portfolios but is not making rash decisions, Mr Potter said.
Talking to FTAdviser in a video interview, which can be seen in full on the website, Mr Potter explained: “Holding fire is not what we have done, but equally we have not been making dramatic changes.
“We own about 100 positions in different funds across our range of portfolios and all of these have been carefully selected from well over 7000 funds in the available universe and we are happy with those funds.
“However, when you have something like Brexit happen, you have to reconsider and therefore we do use futures to increase or decrease our weightings at a moment of time.
“We have done a little bit of this, especially on Friday 24 June, but we need to wait for the dust to settle.”
On 24 June, after the results of the referendum came in, Sterling fell to a 31-year low, the FTSE 100 dropped slightly and the FTSE 250 - traditionally a bellwether for the state of the UK’s domestic economy - fell 7.19 per cent at the close of markets.
Mr Potter added: “We do have some ideas about certain increases or decreases we would like to make in the portfolio and we are not sitting on our hands. But what we have learned over the years is not to panic, not to over-react because it is dangerous to react too quickly.”
Currency is also a concern post-Brexit but investors in the F&C multi-manager portfolios should not be concerned, Mr Burdett said. He explained: “The currency markets are the deepest, widest markets in the world and they are also the most rigged.
“They are used by central banks to control their economies and this can be dangerous for investors. Very few of the underlying managers we look at would say it is a primary source of their returns.
“Having said that, we are neutral the UK at the moment. The day Boris Johnson entered the fray before the vote, Sterling fell 5 per cent and on those days we were adding to the UK. We were expecting, like many people, a Remain vote, but the positioning was mild so we have been less affected so far by the drop in Sterling.
“We have an international overweight anyway in the portfolios so we are happy where we are at the moment.”
simoney.kyriakou@ft.com