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.

Troy’s Lyon: complacency is a major danger

Troy’s Lyon: complacency is a major danger

Troy Asset Management’s Sebastian Lyon has warned the foundations supporting the equity bull-run have disappeared and there is ‘a whiff of panic’ to invest cash at any price.

The AAA-rated manager of the £2.4 billion Trojan fund said the level of bullishness among investors is at its highest level since 2007, while stock market volatility is at its lowest point since then.

‘We are almost four years into the current cyclical bull phase for stock markets,’ said Lyon. ‘The rally began on the solid foundations of valuation and corporate earnings growth but those supports have long since been kicked away.’

He warned: ‘More risk is being taken than investors acknowledge and complacency is a major danger.’

Lyon also questions whether the yield bubble has shifted to equity markets, as the term ‘high yield’ in relation to bonds has become oxymoronic, with junk bond yielding less than ever before.

‘Certainly the demand for UK and global income funds has been strong in recent years,’ said Lyon.

However, he warned: ‘Another 10% rise in the stock market would diminish the yield to 3% and alarm bells would then start ringing.’

He added: ‘We would caution those investing in the Income fund to be prepared to accept a higher degree of volatility.’

Rather than reinvesting cash when terrified, as even sceptics of the equity market rally are doing, Lyon said it is appropriate to disinvest when fearless.

‘Markets have a tendency to climb the stairs and go down in the lift,’ he said. ‘We are not market timers but we are value investors. If and when we cannot find value, we will bide our time.

‘This may be a long and nerve-wracking process, but at least we aim to protect your capital.’

The Trojan fund has returned 33.16% over three years to the end of January, versus the sector average of 17.1%.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Brewin's Gutteridge & Foster talk property with Standard Life's Baggaley

Brewin's Gutteridge & Foster talk property with Standard Life's Baggaley

Gutteridge and Foster discuss UK commercial property with Jason Baggaley, manager of the Standard Life Property Income investment trust

Brewin's Gutteridge asks Odey's Tim Bond two tough questions

Brewin's Gutteridge asks Odey's Tim Bond two tough questions

Gutteridge puts the heat on Odey's asset allocation maestro with a couple of tough questions.

Brewin's Foster & Gutteridge: searching for the yield of dreams

Brewin's Foster & Gutteridge: searching for the yield of dreams

Guy Foster and Ben Gutteridge discuss the latest upbeat US payroll report and how it has increased the probability of a first hike in interest rates in June.

Your Business: Cover Star Club

Profile: Creechurch Capital’s CEO on going the extra mile in a crowded market

Profile: Creechurch Capital’s CEO on going the extra mile in a crowded market

Growing a business is the main aim of many company owners but managing that growth in a controlled way is just as important

Wealth Manager on Twitter