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Schroders £2.3bn multi-asset man drops equity protection play
by Matthew Goodburn on Oct 25, 2013 at 12:28
Multi-asset specialist Aymeric Forest has removed the protection placed on the equity portfolio of his €2.72 billion (£2.3 billion) fund as fears of a US debt deadlock subside.
Forest introduced short maturity puts on the fund's equity exposure at the start of October due to worries over a short term spike in volatility surrounding US political inertia.
He has now opted to close these positions in his Schroder ISF Global Multi-Asset Income fund, as he believes the US has come up with a solution to break the debt ceiling deadlock and overcome fiscal cliff fears.
Speaking to Citywire Global, Forest said: 'We closed those position [two weeks ago] because we had the broad belief that the US would come up with a solution. It then became a consensus view but we were ahead of the curve on that view.’
Forest, who runs the unconstrained fund alongside Iain Cunningham, continues to see equities as the best value asset class and around 35% of the fund is currently invested in it, although he remains wary of further bouts of volatility driven by macro events.
European equities make up the largest exposure (27%), which follows Forest doubling exposure here over the past 18 months. The US made up 24% and the UK and emerging markets 16% and 13% respectively.
European exposure had been around 13% in the summer of 2012 as Forest felt that many company dividends were at risk at the time.
'European equities underperformed until May this year and we have gradually increased our exposure,’ he said.
‘We have been around 26-27% in European equities for the past four months as we think that the dividend risk has diminished, economic growth is being revised higher and valuations still look quite cheap.'
The bulk of that exposure is in industrials and Forest also sees some value in energy.
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