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How to protect yourself against a bond and equity sell-off
Investment Quorum’s Peter Lowman says investors now need to focus on value and recovery-orientated funds if they want to protect their portfolios against a double sell-off in both bonds and equities.
By Alex Paget, Senior Reporter, FE Trustnet
Tuesday May 19, 2015
Investors should now turn to value and recovery-orientated UK equity funds if they want to protect their portfolios, according to Peter Lowman at Investment Quorum, who says the likes of CF Miton UK Values Opportunities and Schroder Recovery are likely to be the best performers in the event of a correction in both bond and equity markets.
Thanks largely to an extended period of ultra-low interest rates and huge helpings of quantitative easing (QE) from the world’s central banks, both bonds and equities have performed strongly since the market bottomed after the global financial crisis in March 2009.
However, many experts are now concerned that a bubble in bonds is bursting as improving economic data has brought expectations forward about a possible rise in interest rates in the US. Some of this pain has already been felt as over the past few months yields on US, UK, eurozone and Japanese government bonds have all risen substantially.
Gold has been one of the most hated assets over recent years, but star manager Sebastian Lyon is betting on the precious metal to rebound. By Alex Paget, Senior Reporter, FE Trustnet. Monday May 18, 2015. Click here for the full report.
The race by the world’s central banks to debase their currencies means holding gold bullion is vitally important in the current environment, according to star manager Sebastian Lyon, chief executive at Troy Asset Management.
Lyon, who heads up the highly popular Troy Trojan fund and Personal Assets Trust, recently told FE Trustnet that investors face the “particularly unpleasant” combination of very low returns and high volatility as years of extraordinary central bank monetary policy have left nearly all assets classes expensive and therefore highly correlated.
However, one area of the market the manager is optimistic on is gold bullion – which accounts for 11 per cent of his open-ended fund and 10 per cent of his trust.
Though the price of gold has fallen considerably since its peak in 2011 to its current level of $1,225, Lyon thinks it will start to become highly sought after as central banks’ total assets, as a percentage of GDP, continue to increase.
“Personal Assets is not a gold fund, although it has been accused of being one. But we have held gold going back to 2005 both as insurance against financial distortions but also as insurance against currency debasement,” Lyon (pictured), speaking at the Cantor Fitzgerald “Opportunities in Multi Asset Investing” seminar, said.
“We have talked about this relay race to debase. Clearly, the euro and the yen are at the vanguard at the moment but prior to that it had been sterling and the US dollar. The reason to hold gold is because we feel this race to debase is, if anything, likely to pick up speed and will not be reversed.”
Central banks, such as the US Federal Reserve, Bank of England, Bank of Japan and the European Central Bank have all tried to devalue their currencies over recent years in order to reflate their economies and reduce the cost of their debt.
Lyon added: “Ultimately, portfolios need some form of protection from this central bank unorthodoxy.”