Miton veers from China risks and boosts cash


The drop in commodity prices and the recent fall in the Chinese stockmarket have brought Miton’s Anthony Rayner to avoid risks in the portfolio and secure more capital into cash.

Since January and consistently through the year, Rayner and co-manager David Jane have reduced some of the overseas government bonds and credit exposure within the £97.2m CF Miton Defensive Multi Asset fund to guard against exposure to oil and natural resources.

From June to July, Rayner also completely sold the commodity exposure of the fund, a gold position, which made 3.7 per cent of the portfolio.

“We are a bit schizophrenic about gold. We recognise that sometimes it does have diversifying characteristics but gold is impossible to value, it is worse than a currency to value.”

On the equities side, the fund has cut its position in Japanese equities from 9.3 per cent in June to the current 6.53 per cent as “China-correlated risks” increased.

Rayner has also ditched US stocks with exposure to China, cutting overall exposure to the country from 7.3 per cent to 5.5 per cent.

He says: “We cut Japan as it is disrupted by what’s going on in China. Japan has started to be more correlated to China as well as developed markets.”

As a result of all these moves, the managers decided to go heavier on cash, increasing the exposure from 3.7 per cent in June to 13.09 per cent in July, “but only because we are unsure of how equity markets are going to move”.

With this “uncertain” outlook on China and the Greece crisis continuing to cause uncertainty in Europe, the UK and US markets are Rayner’s current favourites. 

He says: “The UK and US look better than the eurozone, the economy is getting on a better footing, central banks want to raise rates soon, though there is still some deflationary pressure created by commodities.

“In the UK we are buying into companies not exposed to international markets that are more domestic market-oriented.”

Rayner likes mid-caps, namely housebuilders and consumer staples, and avoids blue-chip companies as most are exposed to the energy sector.


Rayner and Jane inherited the fund from Darwin Investment Management, which Miton bought in June 2014.

Since then the managers have changed the name of the fund and moved it into the IA Mixed Investments 0%-35% sector.

Rayner says: “Going into the multi-asset defensive sector the fund has got consistent performance and risk objectives, whereas previously that was not that clear.”

The fund has maintained its primary focus on capital preservation from the previous management at Darwin, he says. 

Rayner cites cuture interest rate hikes both in the UK and US as potential risks.

“One worry could be around the pound which has been quite strong and that’s because generally investors perceive the UK economy to run much more prudently than the Eurozone economy, for example. Obviously we are also moving towards interest rates hedging upwards like in the US.

“The market will continue to focus on what Carney does with rates, but what’s more important for us is the focus on the context of an interest rates rise rather than when it is going to happen or how much it will go up to.”

Rayner also thinks a ‘Brexit’ might be “an issue” but not for some time.

He says: “The market tends to focus on a few things at the same time and now the attention is more on the US interest rates hike and the Chinese stockmarket crisis.”