Bill McQuaker has positioned Fidelity’s Multi-Asset Open range for a spike in volatility and a slowdown in global growth, saying his views on the world have “changed greatly”.
Mr McQuaker took over the £922m five-strong range earlier this year. The funds were originally positioned for the positive investor sentiment witnessed for most of this year, but the manager has since become more cautious and has reduced his risk exposure.
Previous allocations to Europe, Japan and emerging markets have been dialled down in favour of adding to “strategies that did badly in the first and second quarters”.
In their place, the team has been adding to safe-haven currencies such as the dollar and yen, as well as changing underlying fund holdings.
Mr McQuaker said: “My views of the world have changed greatly and the probability of a continuation of an uncomfortable equilibrium has fallen.”
The manager, who joined from Henderson last year, previously deemed the global economy to be in a “goldilocks” position: healthy enough to stave off recession, but not strong enough for inflation to take hold.
“We [now] have concerns on both fronts,” he said.
“The reduction in confidence is about taking potential diversification while markets continue to rise, but if the mood changes then the portfolio will be robust.”
As a result the Fidelity funds have taken profits on European equities after a strong run for the region. The team has also increased dollar exposure and bought into the £4.2bn Majedie UK Equity fund.
Mr McQuaker said the vehicle was “bearishly positioned”, and had good exposure to the domestic economy as well as international earners.
“This can be right if there’s a recession or if we’re too worried about Brexit,” he noted.
The funds have also added energy exposure and increased allocations to the Fidelity American Special Situations fund.
The value-focused strategy, run by Angel Agudo, has struggled of late as the US market has stormed ahead, but it has outperformed over the long term despite the investment style being out of favour.
On energy, Mr McQuaker said: “The oil price has underperformed oil fundamentals, and oil equities have underperformed the oil price. I like that.”
The Multi-Asset Open Strategic fund now has 2 per cent in physical oil and 2 per cent in oil stocks – a level the manager described as “enough to cement [the position] but not enough to get carried away”.
The Fidelity team has also allocated to the Morant Wright Japan fund. The £484m portfolio was the beneficiary of a change in approach to Japanese equities and the yen.
Mr McQuaker said he wanted yen exposure to help protect his portfolios. He previously held Japanese equity futures without any currency exposure.
The Morant Wright fund gave the desired currency effect as well as equity exposure, he added. “But we can still sell the futures just to have yen. One trade makes that a risk-off bet.”