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Top UK multi-manager piles into cash on correction fears

One of the UK's top multi-managers, Cazenove's Marcus Brookes, has been reducing risk and piling into cash, warning that all assets look too expensive.

 
Top UK multi-manager piles into cash on correction fears

Veteran UK multi-manager  Marcus Brookes has taken the cash weighting in his £1 billion Cazenove MM Diversity fund to its highest ever level at 29%.

Brookes and co-manager Robin McDonald are in capital preservation mode after a strong start to the year and with a mandate to beat cash plus 4% Brookes has been looking to bank some profits and await the next buying opportunity.

Assets have run hard

He told Citywire Global: ‘Assets have run quite hard with so much stimulus in place and with CPI inflation at around 2.8% we have effectively returned a year’s return in the first three months.'

‘Whether the correction coming is 5% or 25% I have no idea but we are in risk reduction mode because it is hard to fund any assets at cheap prices.’

The fund of funds is split into equally weighted thirds of fixed income and cash, equities and alternatives, and has the flexibility to take the alternatives and equities weighting 5% over or underweight the 33% level.

Currently the portfolio is at its lowest possible equity and alternative level of 28.3% apiece but Brookes said that if stock markets came off by at least 10% he would look to add exposure again.

With cash at 29% the fund has a further 15% in fixed income with the biggest position Richard Woolnough’s M&G Optimal Income Sterling fund which makes up almost 8.5% of the portfolio while in the alternatives portion, Philip Gibbs’ Jupiter Absolute Return fund has a 7.7% weighting.

In the equities segment the largest position is an 8% stake in Sanjeev Shah’s Fidelity Special Situations fund which Brookes bought after selling out of Neil Woodford’s Invesco Perpetual fund in mid-2012.

Japan play

The biggest activity in equities over the past six months however has been a steady increase in exposure to Japan through dollar hedged exposure to GLG’s Japan CoreAlpha fund.

Brookes had taken the position up to almost 6.5% of the portfolio but has recently been reducing as he thinks the main uplift for Japanese equities has already happened, along with the main leg down in the value of the Yen.

‘We started to get bullish on Japan at the end of 2011 because it looked so cheap but we probably went overweight three or four months too early. We had seen massive asset inflation around most global markets which left Europe and Japan looking very cheap.’

‘Whatever the Japanese did to stimulate the economy we knew that they would try to weaken the currency so we avoided yen exposure and hedged into dollars. We went overweight Japan when Abe came to power and added QE and the 2% inflation target.'

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2 comments so far. Why not have your say?

Broomtree

Apr 19, 2013 at 08:21

Have just gone to 15% cash but am still adding to Japan - Legg Mason has given over 70%......maybe time to reconsider? Am at a loss to understand fixed income, moved out completely at the start of the year, just too nervous, bond market is not making any sense right now but we are in 'virgin ground' these days! Have been hammered on gold and natural resources but again it happened so fast there is little sense jumping ship at these levels......I hope

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Captain Runaway

Apr 19, 2013 at 09:07

The Jupiter Merlin Team, Henderson Absolute Return and Standard Life GARS have all done the opposite, and are maxing equity exposure because "there is no-where else to put money at the moment." Although back in late January the GARS team moved to almost 50% cash for the correction that never (has yet) came, so a reduction would seem more reasonable.

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