The first of these moves was the decision by Standard Life Investments’ MyFolio team to sell out of its government bond positions for the first time.
As revealed by our sister publication Portfolio Adviser, the firm has removed government bonds entirely from its strategic long-term allocations.
According to Bambos Hambi, SLI’s head of fund of funds, the decision was taken because bond yields are at abnormally low levels. But, far from being an absolute position, he added that the firm remains prepared to tactically allocate to the instruments over a 12-month view, as it did in June. But, as Hambi pointed out, that tactical trade played out in three months.
The speed of recent market moves was also a feature of the conversation Portfolio Adviser had with Dan Kemp and Daniel Needham of Morningstar Investment Management.
As the pair pointed out, many of the tactical positions they put on at the beginning of the year have already achieved what was hoped but on a much-shortened time horizon. As a result, the firm has a significant amount of cash across its portfolios and is likely to sit on that cash until worthy opportunities present themselves.
Suzanne Hutchins, portfolio manager within the Newton Real Return team, agreed with Kemp’s point that across asset classes valuations are currently hefty, telling journalists at an event in London on Wednesday that, in Newton’s view, valuations were looking stretched at the beginning of the year and look even more so now.
But, she added, that has not stopped the firm from moving tactically into US government bonds over the course of the year, a shift that saw the firm’s cash pile fall from 23% in September 2015, to 5% 12 months later.
