Both McQuaker and Haynes have been taking the shears to their emerging markets exposure over the summer, with the latter topping up his positions in CF Woodford Equity Income and JO Hambro UK Dynamic.
“We were holding around 7-8% cash over the summer, and have been drip-feeding it back into some existing UK holdings,” said Haynes. “The FTSE 100 is back to August 2012 levels, which is providing some good opportunities in the short term.
Haynes said that the pessimistic picture being painted across the equities spectrum is pushing investors to be more selective, highlighting Europe and Japan as having potential, which he access via Crux European Special Situations, Invesco Perpetual European Equity Income and Jupiter Japan Income.
On the fixed income side, McQuaker has been tweaking his portfolio to withstand future shocks.
“We have spent the past two or three months taking risk out of our portfolios,” he said.
“We have added duration to portfolios by buying Treasuries and US investment grade in order to make the portfolio more robust, less sensitive to growth and more hedged in the event of a setback.
Haynes added: “At the moment we have some strategic bond exposure and no direct government bonds. The lack of value in the market means that we have not been running in, but we do have Jupiter Strategic Bond in our core holdings as well as Legg Mason IF Western Asset Global Multi Strategy Bond.”
So it appears that the market will have to carry on waiting for the long-anticipated interest rate rise – if not as an early Christmas present, then perhaps a cure for the New Year’s hangover.
However, given the cards that China holds, we could be well into the Year of the Monkey before markets resume their upward swing.
