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Johanna Kyrkland, manager of the Schroder Diversified Tartgeted Returns fund, is "cautiously optimistic" about increasing the weight of her fund in higher risk asset classes in the next few months.

The manager has increased her exposure to equities from less than 40 per cent to 50 per cent since it launched in May and has halved her cash allocation to 10 per cent.

She claimed she was shifting her position in different diversified asset classes in preparation for changes in the investment cycle from a slowdown to a recession phase.

"The recession phase has a bad name but it is the time when you can start to take advantage of some valuations again.

"In the slow down phase we have been defensive, but it is now worth trying to pick through the rubble of the markets as long as you are also being tactical. Over the summer, I have been picking up bits and pieces on the markets but I have not been wading back in.

"Wading back in would be 65 per cent to 75 per cent in equities and I am not doing that, but I did make my first investment in property in July since we launched."

Ms Kyrkland, however, claimed that growing value in financial markets would still be alongside worsening economic conditions, making certain investments unwise.

She said: "I am very negative on the economic outlook so I am still avoiding cyclical stocks such as commodities and emerging market currencies and equities."

And she warned against remaining in emerging markets after their recent run of good performance, warning decoupling was slowing down.

She said: "I am very much favouring the developed markets at the moment because I do not think the decoupling idea that emerging markets will continue to boom as the west is in recession is still proving to be the case."

The fund was launched in May, aiming to offer returns of cash plus 4 per cent through positioning in the specialist investment sector, rather than any of the traditional ones.

Ms Kyrkland said: "For us there are not limits on asset class allocation like there is in a traditional, say, cautious managed fund.

"We specifically do not go for the traditional sectors because your constantly aware of what your peers are doing and that can have an effect of constraining your thinking."