MAM Funds fund manager James Sullivan says they are waiting for a dramatic risk-off period to put cash to work in risk assets in the £835m Miton Special Situations Portfolio and £248m Miton Strategic Portfolio.
Currently, both funds are running a high cash weighting at around 30 per cent.
Sullivan says he is waiting for revaluation in the equity markets before he invests.
He gives the example of Brazil where there are positive signs in the economy, but valuations are not right.
He says: “There is 5 per cent inflation, high level of employment, 3.5 per cent GDP growth forecasted for 2013, but this is baked into equity prices, with a number of domestically facing Brazilian equities trading on price to earnings ratios of 20 to 30 times. It is like with the ASEAN economies. You need to wait until they are the right price.”
Sullivan says the moving of assets towards safe havens will lower valuations in equity markets.
He says: “I expect assets to go back towards safe havens, like the dollar and the yen. I expect the risk-off period to be a bit longer and deeper and we will not see the bounce that we saw in March 2009. The unlimited bond buying is barely touching the sides in terms of the Eurozone debt problem. Spain is going to have to take a haircut on its debt.”