Harwood’s Philbin ramps up cash

The chief investment officer said unpredictable market movements in recent months had prompted him to increase cash levels in 8AM Global’s four-strong Multi-Strategy range, at the expense of equity and alternatives weightings.

In the FP 8AM Multi-Strategy Portfolio I offering – the fund least exposed to equities in the range – the weighting to cash has risen from around 9.5 per cent at the end of 2015 to 13.5 per cent.

The decision has been driven by rules meaning the portfolios must stick to tight volatility bands, as well as a sense that opportunities have been lacking.

“Because volatility is rising and correlations are rising, we find that our portfolios’ volatility is rising,” Mr Philbin explained.

“When we say we run to a certain degree of volatility, we have to do that.

“I won’t be alone in saying it’s very difficult to try and find diversifiers,” he added. “There are very few true diversifiers in the market.”

The shift in the range, which has mainly been funded using new cash flows, comes despite Mr Philbin’s preference to be fully invested.

“I like to be 100 per cent invested, 100 per cent of the time,” he said. “But we are not seeing the opportunities to create diversifiers at the moment.”

He has, however, made some tweaks to the range, including reducing alternatives holdings and taking profits from strong performers.

In the Multi-Strategy Portfolio I offering, Mr Philbin has reduced his holding in Richard Woolnough’s M&G Optimal Income fund and the Natixis H2O MultiReturns portfolio.

He has also cut exposure to the Coupland Cardiff Japan Income & Growth open-ended vehicle in the Multi-Strategy Portfolio II fund.

He noted: “The Coupland Cardiff fund is a product we like but it’s just a little bit of profit-taking.”

On a regional basis, the manager is bearish about the UK’s economic prospects because of uncertainty around both the possibility of Brexit and Bank of England monetary policy.

“Sterling has had a volatile six months or so,” he said. “I know Brexit’s the argument everyone’s giving at the moment, but people are also saying [Bank of England governor, Mark] Carney is struggling with the economy and interest rates. I can see where they are coming from.

“We are in that horrible position between a rock and a hard place, where the US is raising rates and Europe is cutting rates. We don’t know fully where we are.”

As a result of his caution on the UK, it represents just 6 per cent of the Multi-Strategy Portfolio IV fund, which has 72.5 per cent in equities.

Europe, however, represents nearly twice this, because of Mr Philbin’s belief that a “better opportunity set” is on offer.

One area the manager does see as a potential source of new opportunities is Asia.

Mr Philbin, who has recently added to his holding in the Schroder Asian Income Maximiser fund, believes the region could be an area to watch because of cheap valuations and a promising economic outlook.

“The markets look relatively cheap in terms of price earnings ratios,” he said.

“Also, Asia usually does fairly well if the US does fairly well.

“It’s a much more volatile market than the UK, but the consistency of income stream is better.”