Old Mutual Global Investors chief executive Richard Buxton has dismissed fears of a market bubble in equity markets.
The veteran manager has joined other investors in warning over systemic risks within exchange trading funds, however.
Influential investors such as Neil Woodford have recently warned that there are many bubbles in the market that could soon burst, driven by continued monetary policy stimulus from central banks.
Woodford listed Bitcoin going through $10,000, European junk bonds yielding less than US Treasuries, historic low levels of volatility and triple-leveraged ETFs attracting gigantic inflows as particularly worrying signs.
Speaking to investors yesterday, Buxton agreed that some sectors such as Bitcoin might show features of a bubble, but for the global equity market there is “absolutely not” such a risk.
He said: “There is no euphoria in equities and there is nothing representing a bubble characteristic. They are far from it.”
But while he played down bubbles fears, Buxton admitted market volatility is here to stay and that even though certain growth stocks might be at “extreme” valuation levels this is only because central banks are buying bonds.
Buxton said even if a Bitcoin bubble bursts its risk of market contagion will never be as big as that of an ETF crash.
Flows into ETFs globally have surpassed £600bn as of November.
Buxton said: “ETFs are very dangerous and there will be a bubble in the future but they don’t have a leverage behind it. I am more worried about financial markets than the real economy as financial markets innovate a lot and then you have something like ETFs that have this illusion of liquidity.
“A Bitcoin crash would be too small to have a contagion. If you had an ETF problem, you will have a contagion.”