Fund managers brace for volatility spike

Meanwhile, equity market valuations remain at elevated levels, prompting some investors to reiterate the case for diversification across asset classes.

Mike Bell, a global market strategist for JPMorgan Asset Management, said the fund house’s multi-asset team had been using government bonds for this purpose, despite record low yields.

“We won’t see more than a 5 per cent gain [for equities] from here to the end of the year but the downside risk is slightly higher than that,” he explained.

“Because of the asymmetry in terms of the potential upside versus downside, we are using government bonds for diversification as we have seen some protection when equities have been weak.”

Mr Dunbar echoed the sentiment if not the specific investment strategy, noting: “Rather than put forward a clever hedging strategy, what it talks to is a balanced portfolio that doesn’t bet the farm on any single bright idea.”

September’s packed agenda

September 4: G20 leaders’ summit takes place

September 8: European Central Bank governing council meeting

September 15: Bank of England Monetary Policy Committee announcement and minutes

September 21: Bank of Japan announces the results of its review of its monetary policy

September 21: US Federal Reserve meeting

September 26: Opec member country officials to meet

September 26: First debate between US presidential candidates

KEY NUMBERS

5%

Level of cash in Fidelity multi-asset range, up from around zero in spring

42%

Recent implied probability of a September US rate hike