The Pyrford Global Total Return fund has reduced its allocation to equities to 30%, the lowest in the history of the strategy, as manager Tony Cousins says the asset class is "extraordinarily expensive".
The £2.5bn fund has been running for institutional investors for over 20 years and was made available for retail investors two years ago.
Pyrford is an affiliate of Bank of Montreal, which acquired F&C Asset Management in 2014 and subsequently renamed its BMO Global Asset Management.
The absolute return fund aims to generate positive returns above inflation with a low level of volatility and to preserve capital over rolling 12-month periods. It invests in equities, high quality sovereign bonds and cash, and actively manages currency exposure, but avoids the use of derivatives.
Cousins (pictured) said: "Equities are extraordinarily expensive, our equity weighting is at 30% which is the lowest we have ever had."
During the 20-year history of the strategy, the highest weighting in equities has been 45%, but Cousins said there was "no limit" to the proportion of the portfolio that could be held in the asset class.
"When equities reprice, you should expect us to be aggresive in raising our weightings when certain trigger points are hit," he said.
"It could be increased by 10%, then 20%, and could become the majority of the portfolio."
But at the moment the manager is "very defensive", with two thirds of his fund invested in short duration high quality government bonds.
However, he acknowledged that bonds were equally as expensive as equities and is concerned about how they would be affected by the withdrawal of central bank stimulus.
Meanwhile, the manager said the fund has also been helped by its positions in unhedged exposure to the US dollar, as well as the Australian and Canadian dollar, which were put in place ahead of the EU referendum.
"We have made money over the last 18 months via our unhedged foreign currency. We had 38% invested, out of a maximum of 45%, ahead of Brexit," he said.
"After sterling fell we took that risk away by reducing our US dollar position and hedging the Australian and Canadian dollar."
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