Henderson multi-manager McQuaker hikes equities exposure

A perfect storm of attractive stock valuations, falling oil prices and central bank support has prompted Henderson’s Bill McQuaker to ratchet up his exposure to equities.

Mr McQuaker, the head of the group’s multi-asset team, said he had built up cash in all of his portfolios, with the £411m Multi-Manager Managed fund hitting 10 per cent in the asset class by the end of September.

However, in mid-October he began using some of the cash to buy into equity markets and continued to do so as stocks recovered from the lows hit last month.

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“The first reason I built up cash was because I felt there was a fair degree of complacency in markets. The most obvious representation of that was that volatility across all asset classes was at multi-year lows,” he said.

“I felt valuations on the bond side were quite high (and I am still of that opinion) and equities are no better than reasonable.”

Mr McQuaker said he added between 4-5 per cent to equities across “pretty much all our funds”, using derivatives to first access US stocks and also emerging markets.

The manager said emerging markets had been a “laggard” behind places such as the US, adding that some had been affected by the fall in commodity prices.

While this fall has hit some countries, Mr McQuaker said the oil price was a major factor behind his decision to up his equity exposure. The price of Brent crude has fallen from $110 per barrel in July to just more than $81 last week.

“The oil price has come down a long way and is effectively a tax cut to oil-consuming countries,” he said.

“The US is probably most impacted and it is significant for Japan and India, which is good news for global demand.

“We think the consumer, almost certainly led by the US, will be stronger in coming quarters because of the significant reduction in the price of oil.”

He added there had been an impact “even in the UK” on petrol prices, even though a large part of prices at the pumps came from government taxation, which had not changed.

Mr McQuaker said further evidence to boost his exposure to equities came from Europe and Japan’s central bankers.

Mario Draghi, president of the European Central Bank, has made it clear he is willing to expand the body’s balance sheet to €1trn (£783bn), while the Bank of Japan stunned markets at the end of last month when it boosted its easing programme to ¥80trn (£435bn) from ¥60-70trn a year.

“Both of these things suggest the liquidity environment will be better than the market anticipated,” he said.

The manager added that the combination of this support alongside a weaker oil price was “good news”.

“It now means the environment for risk assets has improved since the end of September and certainly since mid-October they are looking considerably more appealing.”