Ingenious Asset Management set to reduce risk

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Ingenious Asset Management set to reduce risk

Advisers could start considering taking some risk out of client portfolios as many assets have become too expensive for the return they offer, an asset management boutique has warned.

Peter Clark, chief strategist at Ingenious Asset Management, warned that volatility in the financial markets was set to increase as a combination of quantitative easing and near-zero interest rates had forced potential investors to take further risks, inflating the prices of an assortment of assets.

Mr Clark said: “More volatility is expected as the global economy continues to recover.

“The increase in the price of assets – as opposed to their underlying value – resulting in higher profits and dividends, cannot go on.”

He said the group’s preferred strategy was to sell those assets which, in the managers’ opinion, have become inflated to levels that no longer provide an attractive enough return for the higher levels of risk associated with that elevated valuation.

Adviser view

Guy Stephens, director of Bristol-based Rowan Dartington Signature, said: “There are some notable sector divergences in terms of underlying earnings and market performance.

“This all sounds somewhat familiar to the challenges faced by markets before growth concerns shot to the forefront, although perhaps with a slightly higher sense of instability in the wake of those events. We believe, more than ever, that the benefits of being carefully selective with your exposure to equity markets provide the best opportunity to outperform.”