Hawksmoor points out that volatility has increased but equities have not experienced a severe setback following the Irish bailout, conflict in Korea and concerns about the Chinese economy.
It says this resilience could be explained partly by the extra liquidity brought about by another round of quantitative easing in the US and partly because companies are in good shape.
Funds that invest in businesses with strong cashflow is Hawksmoor’s favoured part of the equity market. It believes these companies are more likely to deliver decent returns both in absolute terms and relative to cash and bonds.
But it is aware that the problems in the eurozone, Korea and China could affect markets at any time, so it is maintaining its cautious stance for the Vanbrugh fund of funds. The firm believes it is important for the portfolio to be diversified through uncorrelated positions so that if equity markets take a hit, other holdings will keep performance ticking over.
Hawksmoor’s caution has meant there have been few changes to the Vanbrugh fund over the last month, with just a few top-ups to specialist investment trusts such as the JPM Japanese trust, Impax environmental markets and TR Property Sigma. These trusts have been trading at attractive discounts to their net asset value.