Jacob de Tusch-Lec has been steering his £252.2m Artemis Global Income fund away from ‘bond proxies’ after expressing concern over the outlook for typical equity income stocks.
In his latest update, the manager notes that the fund has been positioned over recent months to make it less exposed to traditional equity income plays although he is keeping a close eye on the space.
‘We have continued to move away from bond proxies into growth stories. That said, we think it is important not to make too many changes to the portfolio,” he says.
“Firstly, many bond proxy equities have sold off so much that they are now interesting again! Secondly, considering that the ‘tapering’ of QE (still expansionary but just less so) may only start sometime around April 2014 for a tiny rise in rates in Q3 2015, there is a real risk that markets have over-reacted.”
Part of this move has seen de Tusch-Lec reduce his exposure to Asian real estate investment trusts, as he considers the space to be looking expensive. Artemis Global Income’s exposure to real estate stood at 15.3 per cent in April but this had moved down to 9.8 per cent by June.
At the start of the year in his outlook for 2013, the manager said he was concerned over the outlook for bond-proxy equities if investors start to fear that interest rates could be lifted sooner than the market is pricing in.
“This is something we are particularly concerned about with respect to our Asian REIT investments. Real estate tends not to do too well when rates go up,” he added.
However, de Tusch-Lec has not ruled out return to traditional equity income: “For now, we need to let the dust settle first in currencies and credit-land before rushing back into big bets in equities.”