Anfield Founder and CEO David Young: We’re Selling into Strength Ahead and Buttoning up Tight
In this month’s Promontory I assured readers that we are “keeping our powder dry” in anticipation of a market correction and buying opportunities that would follow. In that spirit I am announcing a cash-raising exercise that will help us exploit such an event.
Having profited handsomely from holdings in a variety of markets and asset classes we decided to increase the cash position of our Global MultiAsset Strategies or “GMAS” (risk factor allocation suite of products) by an additional four percentage points to a total of 12% on average. This follows similar de-risking trades executed in late 2015 and early this year amid a succession of market tremors, from Chinese capital flight to geopolitical concerns and the Brexit. We now face gravity-defying stock markets despite record-high multiples and lower-than-expected earnings, tepid growth, the proliferation of negative-yielding debt and an unpredictable national election even as we enter the traditionally perilous autumn months.
Needless to say, the prospect of an “October surprise” is too compelling to ignore. And, if talk of the “bearish billionaire” bug among such headline asset managers as Soros, Gundlach, Druckenmiller and Icahn is anything to go by, we’re not the only ones who are taking some chips off the table. (At this rate, jokes our senior research analyst, Ray Cheesman, CNBC will soon run out of bulls to feature.)
Specifically, we redeemed shares in a handful of equity funds with exposure to large-cap, high-dividend yield stocks, stock indices, and real estate that had boasted year-to-date and 12-month appreciations of 12-20 percent, as well as high-yield corporate bonds and emerging market debt that realized similar gains.
Since we opened for business seven years ago we have embraced a strategy of fully-invested asset allocation and we are aware that our current cash position may represent a drag on performance. At the same time we warned last year of a risk-laden 2016 and we assumed an appropriately defensive posture. It has never been our objective to maximize returns at the expense of stability. If a few basis points is the price of a smooth ride toward a long-term objective, then so be it. We leave it to the punters to play the peaks and valleys.
The timing and manner in which we will re-deploy this cash reserve has yet to be decided though we will of course circulate a detailed communiqué once the trades are executed. Speaking of disclosure, in response to requests from clients and supporters we will soon be issuing a white paper that elaborates on our tactical decision-making process.