London & Capital ‘tapers’ risk on macroeconomic worries


Wealth manager London & Capital has been tapering risk across its Managed Portfolio range on the view that the rally in risk assets is not supported by macroeconomics.

The firm has reduced its passive US exposure to take a “more targeted” approach to high quality global companies that generate reliable income. It has also increased its cash weighting.

London & Capital investment director Ashok Shah says:“We are now cautious that the advance of equities has not been accompanied by an upgrade in macroeconomic fundamentals. As we move through the second quarter of 2013 the trend in data seems to be of slowing momentum.”

Japan, Shah notes, is the only major nation to report improving economic data, prompted by the country’s “enormous” monetary base expansion and its explicit inflation target.

The US payroll tax increases and March’s government spending cuts, on the other hand, have “taken some steam” out of the world’s largest economy. Other parts of the developed world are also struggling, with the eurozone in the grip of continued contraction.

In emerging markets, growth remains below potential. China – the world’s second largest economy – has disappointed investors when reporting its first-quarter growth figures, contributing to the recent sell-off in equity markets.

Shah says: “Macroeconomic developments have not been supportive of the risk rally and we still believe that global growth will remain below trend as the deleveraging cycle in developed economies continues.”