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.

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: what's behind the second oil crash?

Brewin's Gutteridge: what's behind the second oil crash?

This week Brewin Dolphin's research head talks to Will Riley, co-manager of the Guinness Global Energy fund, about what next for oil.  

Play AA-rated Bullas: what drove my UK small cap outperformance

AA-rated Bullas: what drove my UK small cap outperformance

AA-rated Richard Bullas has quietly been making a name for himself at the helm of the Franklin UK Smaller Companies fund.

Play Sector spotlight: how Harwood's Philbin is playing emerging markets

Sector spotlight: how Harwood's Philbin is playing emerging markets

Emerging markets have been a rollercoaster for investors, but amid the doom there have been have been bright spots, such as India. 

Your Business: Cover Star Club

Profile: CHI's bond supremo on liquidity and bond risk management

Profile: CHI's bond supremo on liquidity and bond risk management

'Some people have been extremely complacent about rate rise risk. Myself, I wish they would just get on with it.'

Wealth Manager on Twitter