William Littlewood has reversed his record-low net equity position on the £921m Artemis Strategic Assets fund, buying into Asian-focused equities.
In May, the manager lowered his net equity exposure on the multi-asset fund to 48 per cent, but in June he raised it back to 54 per cent, according to a client update.
The change was due in part to buying into weakness in equity markets, but the manager also signalled a change in his approach to China.
Mr Littlewood has been bearish on the world’s second-largest economy for some time, and has avoided stocks with heavy exposure to the country.
But while he expects conditions in China to “worsen”, this has become a mainstream view, and Chinese assets have performed poorly. He sees it as a time to buy in as a contrarian bet.
He said: “In the long run, I expect China and other emerging market economies to grow at a good clip. China is no longer such an obvious short – I think it is appropriate to gently add to our miners and Asian banks.”
Until recently, Mr Littlewood had no exposure to miners or Asian banks, but he has now put 3 per cent of the fund into mining stocks, particularly Rio Tinto, and 2 per cent into HSBC and Standard Chartered, to benefit from growth in Asia.
The manager said he was happy to add to his mining and bank positions, considering he still had a short position on the Australian dollar as a bearish position on Chinese metal consumption, but he had also reduced the combined short on the Australian and New Zealand currencies, from 19 per cent to 14 per cent, because they had fallen considerably this year.
The Strategic Assets fund has seen a significant pick-up in its performance since the start of the year compared with its peers in the IMA Flexible Investment sector. It is top-decile for performance in the past three months.
A large part of that pick-up has been Mr Littlewood’s short positions on developed market government bonds finally beginning to generate a profit, producing a 1.5 per cent return in June as most asset classes fell, but the manager has now reduced his shorts on US and UK government bonds.
He said he had reduced his US and UK shorts, which are now worth 21.1 per cent of the net asset value of the fund, because he expected quantitative easing to go on for longer than expected.
He said he had put the shorts on because of the “ability or inability of sovereigns to repay their debts”, and has now reduced them because he thinks there will be “greater money-printing initiatives than the market expects”, which will likely cause bond yields to fall.