Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Central bank ‘incompetence’ keeps Mundy on the defensive

Central bank ‘incompetence’ keeps Mundy on the defensive

Investec’s Alastair Mundy has hit out at central banks ‘incompetence’ for pumping markets full of liquidity despite having no readily obvious exit strategy.

In his 2014 outlook, the veteran investor singled out policymakers as the biggest risk for the year ahead.

Mundy, who runs eight funds across a host of asset classes, said global investors had become solely focused on the issue of tapering and the withdrawal of QE in general, which is a mistake in itself.

‘In a desperate desire to avoid deflation central banks might well inject so much into the system that avoiding longer term inflation will be very hard,’ he said.

‘Yet central banks appear to have extraordinary confidence (or at least they pretend to) in their ability to control inflation and controlling the exit strategy from quantitative easing. There’s no proof whatsoever that they’ve got those abilities.’

Mundy previously blasted ‘cheerleaders’ for talking up US equities despite stocks being expensive and valuations being close to full.

This led Mundy to up his holdings in gold and inflation-linked bonds, while also increasing his cash weighting.

‘My worry is that central banks will discover fine tuning their policies more difficult than they believe. I am therefore happy to hold gold as an insurance policy in case investors develop fears around central bank competence.’

Returning to the theme of tapering, Mundy said this fixation had left many investors vulnerable to onset of problems outside of the United States.

‘The markets are myopic and focused on tapering which means that it is not really prepared for any other shocks which could come from Chinese economic growth disappointment, a crisis in the eurozone, social unrest in emerging markets or trade wars caused by currency devaluations.’

Decidedly defensive

This combination of factors has seen Mundy reiterate his cautious approach to the markets.

‘We are very defensively positioned with significant allocations to cash, gold and inflation-linked bonds. We worry asset classes will be highly correlated in a future market sell-off and are looking to dampen some of this effect.’

His cautious approach has seen the flagship Investec Cautious Managed fund lag its benchmark over three years, returning 21.63% versus a 25.92% rise in the LCI/FTSE 350 High Yield/Brit-Gove 5-15Y composite index.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Related Fund Managers

Alastair Mundy
Alastair Mundy
90/152 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 44.32%
Citywire TV
Citywire TV
Citywire TV
Play Where A-rated Pattullo is finding the best bond opportunities

Where A-rated Pattullo is finding the best bond opportunities

Henderson Global Investors head of retail fixed income explains how he is managing his fund against the surprise current monetary policy divergence.

1 Comment Play Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Our much anticpated new series is here! We hand a black cab driver a tenner and grill the manager of the 125-year Merchants trust until the meter runs out.    

Play Europe bulls, a retail boost and why a little inequality can be a good thing

Europe bulls, a retail boost and why a little inequality can be a good thing

This week’s Investment Pulse looks at whether investors should be bullish on Europe, the surprise rise in UK retail sales and if a little inequality is a good thing.

Your Business: Cover Star Club

Profile: meet the duo at the heart of Hargreave Hale's succession plan

Profile: meet the duo at the heart of Hargreave Hale's succession plan

For the first time in the company's history a non-Hargreave is now at the head of the north west broker and asset manager

Wealth Manager on Twitter