The multi-manager team at Hawksmoor Investment Management has taken money out of commodity and emerging market debt funds in its Vanbrugh fund.
The team has used this cash to top up holdings in Japanese equities and in investment trusts that are trading on big discounts to their net asset values.
Hawksmoor highlights the rapid growth in prices in areas such as emerging markets and commodities due to quantitative easing and the anticipation of further QE.
It says investors are viewing bad news as good because it increases the chances of central banks in developed countries taking further action to prevent a deflationary slump. This means that investors are not seeing good news as positive because it reduces the odds of further QE.
The firm says a lot of investors are chasing low-risk investments, so attractive valuations are hard to find in mainstream markets. A sustained run in markets has caused investors to become more bullish in Hawks-moor’s view but it is wary of investing in areas where a change in investor sentiment could cause a disproportionate fall in prices. It is focusing on areas that it thinks offer genuine growth rather than those that are being pushed up by the actions of central banks in developed countries.
Japanese equities and cheaply rated investment trusts that are trading on big discounts are seen by Hawksmoor as attractive because they are relatively unloved and have not benefited from the recent liquidity-driven rally.
Vanbrugh’s worst-performing holding, BNP Paribas VolEdge, has also been topped up because it could do well if QE fails, prompting a sell-off in markets.
Chief investment officer Richard Scott says: “In this environment, we have been trying to ensure that the focus remains on areas that offer real long-term value. We are trying to ensure we have limited exposure to areas that are in vogue with the QE junkies.”