While Gartmore has no plans to time market movements between cash, equities and bonds in coming yea...
While Gartmore has no plans to time market movements between cash, equities and bonds in coming years, Aberdeen Asset Management intends to take advantage of volatile market conditions and anticipates major fluctuations in the levels of cash going forward.
James Clunie, head of global equities at Aberdeen Asset Management, says equities and bonds are likely to outperform cash during 2002.
While he would normally be fully invested, he expects there to be some opportunities to add value by zigzagging between cash and the other two asset classes according to relative performance in the year ahead.
Cash now accounts for 3% of Aberdeen's managed funds, falling from 7% at the start of the year. The higher cash position was reduced amid the recent market falls, which presented attractive buying opportunities, according to Clunie.
'If the market makes further strong advances and we get a 10%-15% run up from here, then we would be prepared to reduce our exposure to equities and increase our cash weighting as high as 10%,' he says.
'Equally, if there is another set back in the market we will put the cash to work in the stock market, so the level of cash will fall.'
Julian Sinclair, global portfolio manager at Gartmore, says cash weightings in Gartmore's managed funds will vary but this is a by-product of a holding period between selling and buying stocks rather than a strategic move. Gartmore's managed funds are at 5%-6% invested in cash, which is toward the higher end of its standard range.
'Typically, we like to keep cash to a maximum off 6%,' says Sinclair. 'We take the view that we are paid to be fully invested all of the time. However, there are times when you have a stock in the portfolio that you want to get out of, yet have nothing to replace it with, so a cash position does build up on that basis,' he says.
'We try to invest only in stocks and sectors that we genuinely like. So, for example, if we sold technology names, rather than sitting on cash, we would tend to reinvest in something like the consumer staples sector.'
If bearish on equities, Gartmore's cash position would increase but that would be more a result of a lack of stock opportunities.
As a result, Sinclair says cash reached as high as 8%-9% within the managed funds at various points last year. This is close to the maximum level, as many funds cannot go above 10% cash because of scheme particulars and unit trust regulations.
'At the other end of the spectrum, the managed funds have been fully invested,' he says. 'For example, we were fully invested at the time of the stock market rally in October. We will move to be fully invested quite rapidly if we think it is right to put as much cash to work as possible,' he says.
Generally however, Gartmore tends to stick with cash of around 3%-6% but does not use it as an asset allocation tool within the global funds.
'There are also obviously balanced pension funds, which are mostly UK equity based,' says Sinclair. 'They will have a cash and bond component that will change over time. Even then we tend to use cash as a temporary holding place, rather than the fact we think, for example, cash will outperform bonds, which will outperform equities.'
Aberdeen expects to add value by zigzagging.
Equity markets expected to outperform cash.
Market falls provided buying opportunities.
Cash will increase if in bearish conditions.
Often cash cannot exceed 10%.
Equity markets could fall again.
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