Aberdeen’s multi-asset team has been reducing its equity positions to put more money into government bonds, as it becomes more cautious on the global outlook.
Mark Parry (right), senior investment manager, said the team had reduced its weightings in equities because price targets had been met on many stocks.
Mr Parry said he had moved the money raised from selling equities into fixed income due to his “moderately cautious” outlook for global growth.
“Liquidity is supportive, valuations are still attractive, but when it comes to growth all data is pointing to a slowdown,” he said.
“Given the highs in stockmarkets, such as all-time highs in the S&P 500, any significant further progress in equities would require an improvement in the growth outlook.”
Mr Parry said he favoured government bonds because he thought “government bond yields were likely to remain low in the short term given low growth and central bank policy”.
As part of the increased exposure to fixed income, the managers added nearly 3 per cent to the government bond-focused Aberdeen Global II Sterling Bond fund, one of the offshore bond funds that the multi-asset team uses for its fixed-income exposure.
This raised the exposure to fixed income in the fund to 20 per cent, which Mr Parry said was fully invested.
The £720m Aberdeen Multi Asset fund has delivered top quartile returns in the IMA Mixed Investment 40-85% Shares sector for the past one, three, five and ten years, generating 157 per cent compared to the average return in the sector of 109 per cent in the past decade.”
Mr Parry said he was focusing on faster-growing economies in his funds because the pace of global economic growth was “showing worrying signs”.
The manager said the situation in the US was of particular concern because the consumer in the world’s largest economy contributed 16 per cent of global GDP.
He added that it was unclear what the level of fiscal drag would be on the US economy because of the sequestration cuts (government and military spending reductions).
“We are modestly cautious at the moment; certainly less bullish than we were a few months ago,” Mr Parry said.
“Returns are hard to come by right now.”
