Discretionary fund manager London & Capital is reducing some, but not all, of the allocation to cash in its managed portfolio range as part of a tactical asset allocation change.
The firm believes now is the time to put half its cash weightings back into risk assets – equities and commodities, benefiting from attractive valuations. Asset allocation decisions reflect L&C’s macro-economic views, based on an analysis of various economic indicators first in isolation, then as a whole to build an overall picture.
The firm’s decision to step cautiously back into risk assets after reducing exposure earlier in the year is the result of analysis across indicators such as manufacturing and non-manufacturing purchasing managers’ indices, commodity prices, bond yields, equity valuations and the Vix volatility index.
Purchasing managers’ indices provide information on orders for raw materials. Firms will not buy raw materials if there is little demand for their finished products, so this information enables L&C to see how businesses view the market.
Head of adviser solutions Bruce Ely-Johnston says: “We look at a range of economic indicators and the knock-on effects. For example, commodity prices have fallen back recently, taking the pressure off the consumer and corporate profits. This reduces inflation expectations, which reduces interest rate expectations and that helps bonds.”