Aviva Investors multi manager Peter Fitzgerald has increased his allocation to cash over concerns of a potentially “painful” correction in equities.
Fitzgerald is 10 per cent overweight in equities but has decided not to be fully invested.
He says: “We would not be surprised if there was a correction but we would see that in an ongoing bull market and this would be relatively shallow. Nevertheless it could be painful so we have increased our allocation to cash.”
As a result, Fitzgerald is now running around 10 per cent in cash compared with less than 1 per cent towards the end of last year.
Within equities, Fitzgerald is prioritising developed markets over emerging markets.
Fitzgerald says: “We are looking for some inflection point to allocate to emerging markets but we would need to see both investor sentiment and valuations improve.”
Montfort International financial adviser Matthew Denne says: “With tapering starting in the US, there is naturally going to be a fear that equity markets across the world are going to come off. Markets reacted favourably when the Federal Reserve first tapered but this was due to forward guidance and we do not know what the next lot of tapering will be.
“I think assets such as commercial property need to be looked at instead. It is almost a proxy for cash. Whenever there is a correction, there will be a flood to physical assets. Cash is probably a little bit over cautious.”
Charles Stanley Direct head of investment research Ben Yearsley says: “In the short term there is no problem holding cash. You get nothing from bonds so you may as well go for cash. But over the long term there will be an opportunity cost.”