The Share Centre's multi-manager funds have continued to up their exposure to real assets in anticipation of a continued low interest rate environment and expectations recent fiscal and monetary interventions will lead to higher inflation in future.
The weighting to real assets across the suite of three multi-manager funds had increased to between 21.5% and 23% by the end of March, from just 2% to 6% in June 2018, the firm said.
The range, which include the ES Share Centre Multi-Manager Growth & Income, the ES Share Centre Multi-Manager Income and the ES Share Centre Multi-Manager Growth funds, tried to remain "liquid" through the March stockmarket crash, manager Sheridan Admans told Investment Week.
That said, it had begun to deploy cash through April, with the portion of assets in money market instruments down to around 8% in each fund.
The immediate expectation is for a deflationary environment, with a deep recession pushing down prices.
To this end, Admans said the fund was sticking to low-duration and investment grade within fixed income.
"We are going to maintain at the front end so we are not forced sellers and having to accept any price to turn assets into cash," he said.
"For the time being, while we have these question marks [over the scale and duration of the downturn] and the country does have a deflationary spiral, cash will remain king."
However, he admitted to having "a mind to the future" and being happy with the exposure the funds had built up over the past two years to assets such as infrastructure, property and gold.
"We had worries about some aspects of the market, so we wanted to add diversification into portfolios."
The move may eventually prove to be slightly early, with infrastructure unlikely to thrive in a "deflationary spiral".
However, "should and when we get through this, then we are also mindful that we could get quite an inflationary boost and assets like infrastructure should benefit from that".
A similar case can be made for gold in this scenario, Admans added.
Exposure to physical infrastructure comes in the form of JPMorgan Global Core Real Assets, in addition to infrastructure stocks through Legg Mason IF RARE Global Infrastructure and First State Global Listed Infrastructure, which gives the funds "equity market exposure, but with some downside capture".
Within equities, Admans said the portfolios had been "trying to stay as local as possible", as protectionism continues to rise and given the possibility consumers may be more reticent to travel in a post-Covid world.
This exposure comes through mid-cap-biased funds run by Montanaro and Premier Miton in the UK, Legg Mason in Japan and Man GLG in Europe.
In the US, Admans said he had been more sector-specific due to valuation worries, preferring names in healthcare, insurance and infrastructure through S&P tracker funds.
"We have held healthcare for years. It tends to have fairly defensive qualities, which works for us at times like this. We continue to see under-valuation in things like biotech," he explained.
"We have been very encouraged by the technological advancements in that space generally, and also encouraged by regulators forcing innovation to provide a much more accommodative environment for new drugs and technology.
"In extreme times such as this, see those boundaries tested even further."