Rathbones head of multi-asset David Coombs has piled into cash in the £42m Rathbone Multi Asset Total Return and £57m Rathbone Multi Asset Strategic Growth funds.
Coombs has added a 6 per cent cash position to the Multi Asset Total Return fund and a 7 per cent position in the Multi Asset Strategic Growth fund.
He says: “We have let the cash run up in the last few weeks because we are struggling to find ideas in the fixed income market that have any value. My equities exposure is as high as I want to go, as there could be more market volatility.”
Coombs says he is reluctant to put any money into corporate bonds because he is concerned about a correction in prices.
He says: “I have been holding off on adding to corporate bonds. There could be a drop in prices in corporate bonds over the next couple of months.They are really vulnerable to gilt yield rises. If this happens, the spreads will narrow and will make corporate bonds look unattractive.
“There is poor liquidity in the corporate bond market at the moment, so the potential for quite sharp declines is there, and given the potential return of 3.5 per cent, the return does not justify the risk.”
Coombs says despite a low return on cash he would rather settle for this than the possibility of losing money by having high exposure to corporate bonds.
Bestinvest senior investment adviser Adrian Lowcock says: “We are seeing a number of managers becoming concerned about the lack of liquidity in the corporate bond market, with some increasing their cash weightings.”