Top decile multi-manager Martin Gray has abandoned equity purchases for the near future, expecting "more pain" for financial markets.
Gray, the Miton Special Situations fund manager, is not keen on UK, US and European equity offerings, citing more attractive opportunities elsewhere.
His Special Situations fund has its 40% equity exposure invested mostly in Asia and Gray is using the fund's unconstrained approach to focus on cash, bonds and resources.
Gray says his leanings have led him to top the IMA Balanced Managed sector since launch 10 years ago, retuning 215.1% compared to 73.5% for the sector.
“I am not running a benchmarked fund so I don’t have to go into areas I don’t feel comfortable with, such as the US,” he says.
“I am not ready to pour back into equities, I expect more pain. Especially in financials, there are lots of unknowns, lots of skeletons in there.”
Instead of equities, Gray has been building up cash reserves, currently about 25% of his portfolio.
Daniel Lockyer, the iimia Income fund manager, agrees there is more risk investing in the UK.
Lockyer pointed to the fact only seven out of 534 UK equity funds were up in the six months to 15 January.
“In the last few years I have had no fixed income exposure, but in the last 12 months we have taken a more defensive approach and poured money into the area,” he says.
Lockyer does not fully share Gray’s gloomy sentiment, expecting to jump back into equities “very soon”.
“It is beginning to look attractive. We are looking very closely at equities at the moment and will be nibbling in the next few weeks,” he says.
“Investment trusts are very cheap at the moment, with many opportunities at about a 20% discount.
“Closed-end property funds are about a 40% discount, but I would only ever invest in those that are closed-end.”
Amid the currently volatility, the managers believe it has become clear retail investors are unsure what to do.
Gray encourages advisers to use a “common sense” approach.
“It can be easy make decisions during the good times but when there are times of downside you need to look at how a fund can perform amid the gloom.”
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