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Multi-managers are wary of fixed interest

A number of leading multi-managers are becoming increasingly bearish about fixed interest and are favouring cash holdings in their cautious managed portfolios.

Cautious managed funds can hold up to 60 per cent in equities with the balance held in cash and bonds.

Gartmore has reduced its fixed-interest weighting to 21 per cent with deputy head of multi-manager Marcus Brookes claiming equities look safer than bonds in the current economic climate. He says: “As it stands, equities look a far safer bet than fixed interest as market conditions mean that you are likely to lose money with bonds at the moment.

“Interest rate rises and the effect of private equity continue to see bonds downgraded while the price looks overvalued.”

Jupiter’s John Chatfeild Roberts has increased the cash exposure in his Merlin income portfolio to 20 per cent while Schroders head of multi-manager investment Andrew Yeadon holds 20 per cent in fixed interest with 17 per cent in cash.

Yeadon says: “It has been a problem in the market for some time and, with rates now at 5.5 per cent, there is still more value in a cash investment as opposed to fixed interest, with gilts so tremendously overvalued.”

T Bailey fund manager Jason Britton says: “We have dropped our fixed-interest exposure to 20 per cent. Bonds are an asset class which is so overvalued and has little or no alpha so we have to be as flexible with our investments as possible.”


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