View more on these topics

L&C cuts equity risk in volatility fear

Discretionary fund manager London & Capital has reduced exposure to equities and commodities in its managed port-folios because it expects volatility to rise.

Executive director (investment strategies) Neil Michael says he has turned down the risk dial on the portfolios as part of a tactical asset allocation change.

L&C wants to be seen by advisers and clients as a safe pair of hands so rather than chase performance at all costs, it battens down the hatches by increasing exposure to cash. Risk is taken off the table in this situation by reducing exposure to equities and commodities, which the firm sees as risky assets because they are hit first when volatility rises.

Money taken out of risky assets is held temporarily in cash, then goes back into equities and commodities when L&C’s analysis signals a likely fall in volatility. At this point, the fund is able to benefit from picking up stocks at cheaper prices.

The decision to reduce equities and commodities was based on factors including the strong rally in markets, a fall in volatility, tightened monetary policy in China and spikes in the price of oil and commodities.

Michael says long-term bond yields increased against this backdrop, leading to an increase in interest rate expectations and a tightening of monetary policy.
This hurt the peripheral European countries, leading to sovereign debt problems, while inflation risk in the UK has caused bond yields to rise.

Michael says: “The experience is worse because of events in Japan, which could be negative for economic activity. The recovery of global activity could slow as a result of the tragedy.”


Garry Hale, Director, HK Wealth Managers

Hearing aids

Not long now….my AF3 Pensions Planning exam is on Monday, April 11. This is a challenge as I have found myself very busy with work in the lead-up to the tax year end. I wonder if the CII considered this when setting exam dates early in April? My other concern is that I am also […]


No adviser is but an island? Until recently, the majority of advisers did a good job of pretending otherwise. Scattered around the country, they would meet at the occasional conference, perhaps carp about the regulator but the concept of sharing information and best practice remains a relatively new one. It has taken off with vigour […]

Neptune launches Japan Institutional Fund

By Chris Taylor, Investment Director, Head of Research Neptune is excited to announce the launch of the Japan Institutional Fund on 22 June, having disclosed to the market in March its intention to offer the product. The Fund will be managed by the highly-regarded Chris Taylor, Head of Research and manager of the long-running Japan Opportunities Fund. It will invest in the same underlying stocks as the Japan […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm