Psigma’s Becket: Cash is king in times of tension

Cash is the safest asset class to be in at present according to Psigma Investment Management chief investment officer Tom Becket.

Cash levels have been raised “aggressively” within Psigma IM’s portfolio in response to increasing geopolitical tensions and expensive looking equity and credit markets.

Becket says: “In any correction, whether geopolitically-inspired or not, cash is king.

“However, with gold having performed very poorly in the last few years and looking technically poised for gains, we had been recommending that all our portfolios held a decent level in gold as an insurance policy.”

Gold has seen inflows off the back of geopolitical tensions stemming from the Ukraine crisis and, according to ETF Securities, gold ETPs saw net inflows of $223m in the month to 11 August with $82m also going to oil ETPs. 

Becket has also made a move to increasing holdings in “safe haven” assets such as US Treasuries.

He adds: “It is worth noting that we are seeing recent lows across ‘quality’ government bond yields, with the UK and US yields gaining back all the losses they have made in the last year, as investors had priced in interest rate hikes. 

“Most noteworthy are German bund yields, the European safe-haven asset of choice. As Russia has spooked investors and European economic data has been woeful, we have seen German five year bond yields turn negative and ten year yields collapse to record low levels near 1 per cent.”