Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a747463

Q2 WM Outlook: how these readers are managing equity risks

by David Campbell on Apr 30, 2014 at 00:01

Q2 WM Outlook: how these readers are managing equity risks

Half of all wealth managers had moved to either explicitly or implicitly hedge their equity exposure at the beginning of Q2, as the macroeconomic uncertainties of the last five years began to give way to more tangible concerns about equity valuations, earnings and momentum.

Polled as the tech sector led US indices downward over the first half of April, exactly 50% of correspondents to Wealth Manager’s quarterly survey said they had upped cash, increased absolute return allocations, or directly bought derivative or volatility protection.

Much of the remainder either reported running down equity allocations or reorientating exposure toward lower-beta areas of the equity markets.

Short-term prudence had not yet spilled over into real risk aversion, however. Asked to describe the level of equity risk they were currently running in client portfolios, on a scale of one to 10 where 10 was the greatest, the median response was 6.24.

‘We’ve seen a complete change in the nature of investment risk over a very short time,’ said Alastair George of Hasley Investment Management.

‘Not so long ago, markets were obsessed with economic volatility while low valuations were overlooked. Now, economic risk is much lower but the key risk is in equity valuations, especially for mid caps as US and UK monetary policy normalises, even if only slowly.

‘Our equity portfolios are weighted to large caps where valuations are still reasonable. There’s rather more evidence of over-enthusiasm in the mid cap sector. [We are not actively hedged], we’re just keeping it modest.’

Buying covered calls

Gary Stockdale, principal of Vertem Asset Management, said he had bought covered calls and upped absolute return exposure, while Courtiers chief investment officer Gary Reynolds said he had cut equity beta and purchased put options. Heather Maizels, managing director of Victoria Private Investment Office, has hedged volatility. 

‘We have recently added an asset allocation towards absolute return to give us some insurance policy towards future volatility in the equity markets,’ said Peter Lowman, chief investment officer at Investment Quorum. Popular picks included Troy’s Trojan fund and the Darwin Multi Asset fund.

Sign in / register to view full article on one page

leave a comment

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

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Sponsored Video: Barings on investing in Frontier Markets


From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.

More about this:

Look up the funds

  • Trojan O Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • TM Darwin Multi Asset Acc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the shares

  • Charles Stanley Group PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Gary Reynolds
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Daniel Lockyer
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet