The manager of the £1.5bn Rathbones Global Opportunities fund has reduced the level of risk in his portfolio to the lowest level possible.
James Thomson said he was concerned about the fragility of economic growth, so was increasing his fund's exposure to low risk companies to its maximum level possible.
The fund manager said his experience in the financial crisis, when, in common with most other equity funds, he suffered severe losses, caused him to introduce a segment of his portfolio filled with "stable" companies, as opposed to those with high growth characteristics, which comprise the rest of the fund.
He said the stable companies account for between 15 and 25 per cent of the portfolio, depending on his outlook for the market. At present, he has the maximum 25 per cent of the capital allocated to those companies he considers best able to resist a crisis.
He said: "Despite many of the economic indicators being positive, I am nervous about the fragility of economic growth. The data we have should mean GDP is much higher than it is, but that hasn’t happened. So it wouldn’t take much of a negative event for there to be a downturn in the economic data.
"With that in mind, I think its the right thing to do to have 25 per cent of the portfolio in stable companies."
He defined those as businesses which are not reliant on economic growth in order to thrive. He said companies in healthcare, pest control and nursing homes fitted into this category.
Mr Thomson is also keen on large technology companies such as Amazon. He said they are not simply performing well, as many fund managers believe, because the growth style of investing is in vogue, but because they are disrupting existing markets.
He said he doesn’t regard valuation as a reliable indicator of future returns, but instead focuses on whether companies can continue to grow.
Mr Thomson never invests in emerging markets or Japan, despite businesses there comprising a substantial part of the global equity market.
He said: "I think in those areas you need to have specialist knowledge and I don’t have that. I think you have to spend a lot of time on those markets to add value, so I won’t invest there, I’m happy to leave it to the specialists."
Mr Thomson’s fund has returned 112 per cent over the past five years to 19 July, compared with 67 per cent for the average fund in the IA Global sector in the same time period.
Jacob De Tusch Lec, who runs the £4bn Artemis Global Income fund, which is the top performing fund in the IA Global Equity sector over the past five years to 19 July, is another fund manager reducing risk.
He said: "While we don’t believe recession is imminent, we do acknowledge this is more than just a soft patch of the type we saw in early 2016 and 2017."
Mr De Tusch Lec said the difference between market conditions now and in previous years is that in 2016 the US Federal Reserve responded to the relative weakness of global economic growth by delaying a rise in interest rates. He said the chances of this happening again on this occasion were small, and higher interest rates should be bad news for equities.
He said: "Our response has been to take some of the cyclical risk out of the portfolio."
The fund manager said he has also reduced his exposure to banks in both Europe and the US.
Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford said he is preparing clients portfolios for higher inflation, as he expects inflation in the developed world to be in the high single digits in the years ahead.
david.thorpe@ft.com
