Rathbone Unit Trust Management’s David Coombs has claimed the current environment is “very difficult” for running low-risk multi-asset funds due to high asset prices across the board.
Mr Coombs is currently holding roughly 20 per cent in cash in his £58m Rathbone Multi-Asset Total Return fund, and has minimal exposure to traditional fixed income.
He has also cut back long-only equity exposure from 40 per cent to roughly 30 per cent of the portfolio.
“Running a low-risk strategy is very difficult when markets are at or above fair value,” Mr Coombs said.
“I’m saying to advisers and clients, if you’ve got a five-year strategy then a low-risk fund is probably not for you while the bond and equity markets are where they are.
“I’m trying to buy government bonds at 3 per cent yields but they are not getting there.
“I’m struggling to spend the cash. At the moment you have two choices – you either wait or you chase yields.”
He warned that managers of other ‘low-risk’ funds may have been tempted into less liquid asset classes in recent months in search of performance less correlated to equities or bonds, or in a bid secure higher yields.
The manager said: “Other low-risk funds are taking some liquidity risk and forgetting the lessons of 2008. They are looking in the wrong places for risk.”
Mr Coombs admitted that his current positioning was likely to lead to a short-term drag on performance, but emphasised the choice investors needed to make between “chasing returns or protecting money”.
While the Multi-Asset Total Return fund has gained 11.2 per cent in the three years to May 8, according to FE Analytics, in the past 12 months the fund has lost 0.7 per cent, underperforming its target return of 2 per cent over six-month sterling Libor.
The portfolio is approaching the fifth anniversary of its launch in June 2009, since when it has gained 30.4 per cent.
The fund’s March 31 fact-sheet shows Mr Coombs has backed a number of global income funds, including Jacob de Tusch-Lec’s £767m Artemis Global Income fund, the Pimco Global Equity Dividend fund and the Veritas Global Equity Income fund – all in the portfolio’s top 10 positions.
Mr Coombs also runs the £77.7m Rathbone Multi-Asset Strategic Growth fund, also launched in June 2009, which has gained 45.7 per cent since inception.
The Rathbone Multi-Asset Enhanced Growth fund – Mr Coombs’ highest-risk portfolio – has gained 11.1 per cent since its launch in August 2011.
The rise of global income
There remains a hunt for income as the west continues to live in a world of record low interest rates.
Multi-manager David Coombs has increased his exposure to global equity income funds of late, a type of fund the industry’s manufacturing machines are producing at record speed.
In just the past few weeks, Invesco Perpetual launched the Global Distribution fund, a wider take on its existing Distribution fund. Bond managers Paul Causer (pictured) and Paul Read will be running the new fund alongside the group’s global equity income group.