The portfolio of the £10m CF Canlife Total Return fund has recently tilted towards fixed interest, with the manager being critical of the the sustainability of equities.
Putnam Investments global asset allocation group co-head Jason Vaillancourt, who manages the fund on behalf of Canada Life Investments, has made changes to the fund’s equities allocation in favour of fixed interest rate exposure.
Vaillancourt says: “From November to early March global equity markets were going up with very little volatility. With the macroeconomic environment we have been in, that struck us as too good to be sustainable for much longer. It seemed like the prudent thing to do then, to scale back on equities as things had gone too far too fast in our view.
“Our view very recently has been that the pace of the increase in interest rates has gotten a little bit too extended as well. A lot of that was pricing in what people viewed as a more aggressive tapering of QE by the Fed in their asset purchase programme. We felt the debate around tapering has gotten a little bit ahead of itself.”
The fund, which was launched in January 2013, has also seen its commodities exposure halved in recent months. This move was made in response to Japan’s quantitative easing impacts and the sell-off in gold markets.
Vaillancourt says: “Our commodities exposure is now closer to 10 per cent in capital terms. The theme around precious metals is that we wanted to have a hedge against global quantitative easing and the debasement of paper money.
“You had gold sell off at nearly 5 per cent in the following weeks, which ran as very contrary to what we expected it to do. There was a big disconnect between what the thesis was for precious metals and what was actually happening in the markets. So we took pause.”