Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Lyon: a 'little Ice Age' could be on its way

Lyon: a 'little Ice Age' could be on its way

While Trojan and Personal Assets star Sebastian Lyon is convinced the developed world is headed for inflation, a mini 'ice age' of deflation could come first.

Lyon (pictured) told investors in his closed-end Personal Assets trust that economic momentum could cool further in 2013 and while central bank policies will ultimately lead to a spike in the cost of goods and services, deflation may come first.

'GDP forecasts have drifted downwards and the burden of lifting the Western world out of its financial morass has fallen on the US and Germany, despite their growing at well below their historic rates. Our caution on the UK has been justified and of the major developed nations only Italy and Spain are expected to fare worse in 2013,' AAA-rated Lyon explained.

'While we are convinced the most obvious bull market at the moment - the one in central bank balance sheets - must ultimately lead to inflation, a 'Little Ice Age' of deflation may still come first,' he added.

According to his trust's half-year report covering the six months to the end of October, Lyon maintained a high liquidity buffer in his portfolio, roughly 51%, over the stretch, reflecting his cautious stance and believes that defensive blue chips also became expensive over this period because income-starved investors piled into the stock market despite falling growth forecasts leading to lower earnings forecasts.

But while Lyon is certain of inflation, he acknowledged that asset allocation timing can prove difficult and has reacted accordingly.

He explained: 'Since timing asset allocation for these outcomes is impossible, we have tried to prepare for both by building the portfolio on four 'pillars': blue chip equities, index-linked bonds, gold bullion (including gold mining shares) and cash.'

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

Sebastian Lyon
Sebastian Lyon
31/34 in Mixed Assets - Absolute Return GBP (Performance over 3 years) Average Total Return: 6.67%
Citywire TV
Play Dispelling the sustainable investing myths

Dispelling the sustainable investing myths

There's a bit of a buzz around sustainable investing at the moment. We speak to three wealth managers to find out what they think.

Play Inside ETFs: positioning for the Fed rate rise

Inside ETFs: positioning for the Fed rate rise

Natalie Fast discusses how investors are using ETFs to position for a rate rise with guests Irene Bauer from Twenty20  Investments and Markit's Simon Colvin.

Play Wealth Manager Retreat: video highlights

Wealth Manager Retreat: video highlights

The UK's leading wealth management talent gathered at our annual event at the Grove celebrate the best in private client portfolio management.

Wealth Manager on Twitter