Seven Investment Management has announced it is holding relatively high levels of cash across portfolios as politics inform their investment process “more than ever”.
The asset manager says in its Q4 investment update that it has decreased its positions in the three leading equity markets of the UK, US and Europe, while increasing exposure to emerging market local currency bonds and US high yield bonds.
In emerging market equities it remains overweight, but has taken some profits.
7IM co-founder Justin Urquhart Stewart says the firm combines a strategic view of assets based on 50 years of historical data with a tactical view on what may happen over the next three to 12 months.
“However, now more than ever, our investment team are also having to judge how politics play into this planning.”
Regarding Brexit, Urquhart Stewart says investors are now in the difficult position of deciding how to respond to the market rally since June that has caught many by surprise, but that seems to be above levels that macro and micro data supports.
A Donald Trump win in the US presidential election may mean traditional safe havens, such as the US dollar and US treasuries, cannot provide investors with the protection they would typically expect.
In order to de-risk portfolios the firm is expanding its allocation to alternative strategies, including commodity carries that are broadly uncorrelated to equity and bond markets.