Psigma Investment Management's chief investment officer Tom Becket believes it is 'harder than ever' to find opportunities to buy interesting new funds, resulting in more concentrated portfolios.
The team at Psigma runs a range of bespoke model portfolios and a managed portfolio service, but cash weightings have been rising recently due to a lack of good, high-quality funds.
"It is harder to find new opportunities than at any point in my career, which means the funds are becoming more concentrated," said Becket (pictured).
"A year ago we would have had 30 funds and now we only have 24. Our buylist has also become more concentrated and only has 31 funds."
The fund is currently holding 5.5% in cash but this may rise as the firm has seeded the AXA Global Short Duration Bond fund, which was launched in May and is managed by Nicholas Trindade.
As this fund is being used as a cash substitute, the 'cash' weighting will increase to 10%, compared to 0% at the end of 2015.
"We hate having to hold cash but it is difficult to put it to work and find good, high-quality funds. We do not want to be investing for the sake of it," Becket added.
There are currently three themes at work in the funds; defensive, global recovery and thematic growth.
Some of the firm's preferred funds within these themes include Polar Capital Blue Chip Healthcare, where it has recently taken profits, Jupiter Absolute Return and Artemis Global Income.
The firm also noted investors have to be more willing to invest in "unfamiliar assets" in order to achieve greater returns. Its weighting to alternatives in the portfolios has increased from 10% at the end of 2015 to 13% currently.
Becket and the team have also raised their bond weightings, with sovereign debt exposure increasing from 2.5% to 6.5%, investment grade moving from 15% to 18.5% and index-linked bonds increasing from 5% to 7.5%.
'Significant' Brexit transitional deal needed
Rosalyn Breedy, corporate and financial services partner at Wedlake Bell, says UK asset managers should tackle their operating models to develop financial firms fit for the 21st century.
Higher stakes and limited options
Will negotiate for transition period
Sandro Pierri joins as global head of client group