By Mohamed Ali Bernat Equitable Life is viewing current market volatility as a buying opportunity, e...
By Mohamed Ali Bernat
Equitable Life is viewing current market volatility as a buying opportunity, expecting stocks to rebound in the near term.
David Marchant, assistant general manager in charge of asset allocation for Equitable Life's managed pension, said he has been actively buying both value and growth stocks during the recent volatility.
He said: "Looking forward six to nine months we believe a lot of the concerns today, such as high oil prices and rising interest rates will have passed. The $30-plus level for oil looks unsustainable and interest rates are close to peaking in Europe, the US and the UK. Now is the time to be buying. Sentiment is pretty bad at the moment and it is a good time to be buying in the dips."
The fund's benchmark weightings are measured relative to its peer group, using Lipper data. It has an overweight position in UK equities with 55.2% exposure, and is underweight UK fixed interest with 8.2% exposure.
Other underweight regions are the US with 5.1% and the Far East at 2.1%. Marchant said he always has been slightly suspicious of the Asian recovery story but believes the value of some technology stocks in the region is looking too good to miss.
"Some of them are looking good value. If you take a look at Samsung in Korea versus Micron in the US, the difference in valuations is huge," he said.
Marchant said the fund did not have a strong sector bias and was run on a company-specific basis.
Globally there have been a lot of profit warnings, not just in technology companies but also in old economy stocks. While Marchant is underweight telecoms in general, he does believe Vodafone remains attractive at its current valuations.
He said: "When the pricing was at the £4.00 level people were putting pretty aggressive numbers on Vodafone profits, saying that everybody on the high street would have a mobile and would be using it to transact their day-to-day business.
"That did not seem realistic and prices are down to nearly half their previous levels.
"There is now less froth and the company is on a multiple of about 30, which is not too outrageous."
Marchant has also been buying Microsoft throughout the year, which he admitted has not been a good strategy over the short term but was in line with the house style which is to pick up growth stocks when they are out of favour with a view to capitalising on upside potential.
This model has also been applied to Japan, a country where Marchant is running an overweight position
He believes rising interest rates would not be a bad thing as it may have a wealth effect in Japan with the man on the street starting to spend money again if he sees his savings growing.
Marchant said: "Again it is seen as a laggard but even if rates went up to 2% there is still a lot of potential for upside.
"There has been a bankruptcy of the second largest life assurance company but it is a good thing that poorly operated firms are being allowed to go under as it makes for a healthier market."
£300bn of liabilities
View from the front row
Transfer from occupational scheme
Appointed by FCA and PSR boards