Psigma’s Becket goes passive in hope of FTSE rally
Psigma’s chief investment officer said he had also begun altering the size of existing holdings as a form of tactical trade, in lieu of major shifts in asset allocation.
Amid a precipitous fall in equity markets – particularly China’s – in the last week of August, Mr Becket raised Asian exposure within the firm’s managed portfolio service as “a short-term market rally play”.
He subsequently recycled returns from this trade into Japanese equities, before buying Fidelity’s Index UK fund earlier this month, in expectation of a rally led by out-of-favour stocks such as energy firms.
Mr Becket explained: “If you want to express a positive point of view [on markets], the best way to do it is [with] the FTSE [100]. It has oil, emerging markets and cyclical stocks – all things likely to lead a rally.”
He believes other investors have become accustomed to a low-growth, low-inflation environment, however these factors could rebound strongly in 2016.
Mr Becket said new exposure to more risky assets could work, with more defensive assets – which are beginning to look expensive – faring badly should his predictions come true.
He said: “At the moment the standard [and defensive] asset allocation might have benefited from five years of low growth and inflation.”
However, Mr Becket said that if markets did not fulfil their rally potential, defensive assets would still suffer alongside riskier ones, but if growth and inflation returned, the assets would fall behind further.
“I think what central banks are trying to do will be successful. We are starting to see the early signs of inflationary pressures: wages are starting to rise, commodities are reaching their lows, [and] governments are trying to get growth through credit supply.”
Within his range the asset allocation to regions is “quite neutral”, but Mr Becket believes small changes could be advantageous as the equity market looks likely to hit a peak.
He said: “We hold the view that the bull market in equities is probably reaching its climax, so we are taking a more proactive and tactical approach.
“We think it’s much more important [now] to be regionally selective and tactical.”
In fixed income, Mr Becket favours areas that will be less sensitive to interest rates in the event of these rising, such as short-duration bonds, asset-backed securities and high-yield credit.
