Rathbones’ David Coombs: ‘We have the highest cash exposure we’ve ever had’

Rathbones’ David Coombs has increased his cash allocation to an all-time-high ahead of this week’s Dutch election and the potential new monetary policy stimulus from the US and UK.

Coombs, head of multi-asset investments at Rathbones, says the firms’ Multi Asset Total Return and Strategic Growth funds currently have the highest cash position they’ve ever had at 35 per cent and 17 per cent respectively.

Speaking to Fund Strategy, Coombs says: “We are holding a lot more in cash as it’s a very prudent thing to do right now. We are mostly invested in cash and equities. There’s a lot of cash out there chasing a home so we’re not alone. There are a lot of people that are nervous. We are looking for a healthy correction now, to be honest.”

Coombs says the key focus for the team is to identify currency movements and where the market will go, especially after the upcoming European elections.

He says: “The biggest focus for us now is the currency markets and trying to work out where sterling is going to break. The downwards movement of sterling has been in quite a narrow range now for five months and at some stage it’s going to go one way or another. It is a 50/50 bet so we’re trying to focus on that.”

In the multi-asset range, the team has edged out the euro and the dollar but the position is reviewed on a daily basis as from the end of last year.

Coombs adds: “The Dutch election on Wednesday will be pretty key to where the euro is going to go as well as European bond yields. I’d argue this is more critical that the US rates increase. If Geert Wilders [in the Party for Freedom] wins control of the Dutch parliament that would be quite a big shock.”

Meanwhile, the fund manager expects the Federal Reserve to act and raise interest rates in the US as widely expected by the market.

He says: “It’s an healthy thing that the Fed could rise rates this week. The US economy is in a good place and we have almost all of our exposure to the US so if anything that supports my view that we want to be there.

“We’ll also see a rate rise in the UK in the next three months as well, but if we don’t have a rate rise that will make me more worried.”