Anthony Gillham, head of the multi-asset business at Quilter, has been reducing his clients' exposure to equities as risk levels rise globally.
Mr Gillham is head of the investment team at Quilter Investments, the business that was formerly part of Old Mutual Wealth. The team manages £17.1bn, across a range of funds.
The manager said he differs from the widely held view in the market that inflation is going to rise around the world, leading to significantly higher bond yields.
That scenario would be expected to lead to bonds performing poorly, while equities do better.
But Mr Gillham said he does not expect inflation to rise significantly. He said that despite the low levels of unemployment in the US, inflation has not risen by as much as expected, due to the nature of many of the jobs being added.
Those jobs, he said, have been in the gig economy, with insecure hours and income levels, and so have not contributed to higher levels of demand in the economy, and inflation has remained low.
With this in mind he has been buying more bonds as investors have been negative of those assets in expectation of higher inflation, creating what he believes is an investment opportunity, because bonds will perform better when inflation doesn’t rise and investors begin to buy them again.
Bonds tend to perform badly when investors expect inflation to rise, this is because the income from a bond is fixed, and the purchasing power of this income is reduced as inflation rises.
Mr Gillham said he has been “reducing risk” in the portfolios he runs, with the uncertainty of US trade policy and political uncertainty in Europe and the UK mean it is a prudent time to reduce equity exposure.
Simon Edelsten, who runs the £91m Artemis Global Select fund said the stocks likely to be worst affected by a trade war will be those traditionally considered “cyclical”, and instead is focused on companies that can grow regardless of the wider political outlook.
David Scott, an adviser at the firm of Andrews Gwynne in Leeds, said he has put a significant slice of clients portfolios into cash due to the level of market uncertainty.
David.Thorpe@ft.com
