Aberdeen Asset Management head of global strategy and asset allocation Mike Turner has moved against the ‘great rotation’ by adding exposure to bonds in defence against an overly bullish equity market.
Turner has added 2 to 3 per cent to gilts and high-grade credit in his £682m Aberdeen Multi Asset fund, using money from cash inflows in the portfolio.
The manager says bond markets are not great value over the medium term, but he is more cautious about the scale of rises seen recently in the stockmarket. He singled out the US equity market, which has been rising virtually uninterrupted since June last year, and questions how far this can go before it starts to looked stretched.
Turner says: “We are becoming a little more cautious on equities, so we think there is the potential for equity markets to correct a bit. Usually the right thing to do if you come out of equities is to go into bonds.
“We don’t think equity markets are going to fall a lot this year, far from it, but we don’t think necessarily the returns we will receive this year are going to be the same as we saw last year.”
Turner says he does not expect to have a high allocation to bonds for a long time, as “you don’t earn a lot on bonds these days”, but says it is a short-term precaution against the potential for equity markets to correct.