7IM takes gold to highest ever level on ‘sea of negatives’

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7IM’s gold exposure is at its highest level ever as it warns of a “sea of negatives”, particularly around geopolitical risk, that it expects the market will eventually overreact to.

The investment manager currently holds 15.4 tonnes of the safe haven – more than a number of countries, including Hong Kong and the United Arab Emirates.

CIO Chris Darbyshire says stockmarkets are facing elevated risks.

We’re not saying financial Armageddon is imminent: we have a habit of often being ‘early’ in our calls, so there could be some way for markets to run yet,” Darbyshire says.

The firm has been accessing gold via ETCs, although it continues to add to equities despite being risk off where it can find good managers.

Miton European Opportunities has just been added to its multi manager portfolios.

Darbyshire says markets are inverse to Q1 2016, when they were “relentlessly and unnecessarily negative”.

“Today, we are faced with a sea of negatives, which at some stage we think the market will finally overreact to. We have Brexit uncertainties, tensions between North Korea and Trump, we have a Polish Prime Minister seemingly intent on becoming a dictator (and it is no small country, with a population of almost 40m), and sanctions in Qatar.

“Will we see a US trade war with China? It’s another scenario we can’t one hundred percent ignore. In this context, our gold exposure is at its highest ever level, although we continue to look for opportunities, and are still adding new equity positions.”

Investment manager Ben Kumar says: “We like the security of knowing that our gold exposure it is backed by a vault of gold, mostly through Source Physical Gold, but with some exposure to iShares Physical Gold tacked on.”

Interactive Investor head of investments Rebecca O’Keeffe says the ease with which markets shrugged off last week’s geopolitical events is part reassuring, part frightening, and that trying to call the top of the existing market has been a fool’s errand.

“Reassuring in that it confirms there is a wave of liquidity willing and actively looking for buying opportunities on any dips. Frightening in that markets appear to be utterly invincible to any threat, despite potentially stretched valuations.

“It looked like the market was at a tipping point last week, but the robust rally over the past two days suggests that there are still plenty of investors who think otherwise.

7IM funds with highest gold exposure at 31 July 2017 (%)

AAP (Asset Allocated Passive) Funds

Multi manager funds

Specialist funds

7IM Cautious Fund: 8.1%

 

7IM Moderately Cautious Fund: 7%

 

7IM Personal Injury Fund: 8.2%

 

7IM AAP Balanced Fund: 7.2%

 

7IM Balanced Fund: 7%

 

7IM Unconstrained Fund: 6.9%

 

7IM AAP Moderately Cautious: 7.2%

 

7IM Moderately Adventurous Fund: 5.9%

 

 

7IM AAP Adventurous: 6.2%

 

7IM Adventurous Fund: 5.9%

 

 

7IM AAP Moderately Adventurous: 6.2%

 

 

 

Source: 7IM