A third of UK Wealth Managers opting for “correction protection”
A third of the UK’s leading wealth managers have warned they are holding cash across clients’ portfolios in anticipation of a market correction, a survey by Legg Mason Global Asset Management has found.
Following a year in which UK and global equity markets have made significant progress, and with many other assets – including parts of the fixed income universe and the commodities space – also delivering positive returns, wealth managers are increasingly concerned that the market has got ahead of itself.
As a result, a third of wealth managers (32%), who collectively manage in excess of £100bn, said they are holding cash across clients’ portfolios to protect against a correction.
Whilst ensuring they have some level of protection, wealth managers overall remain positive when it comes to their overall attitude to risk.
In total, 39% said they were somewhat optimistic when it came to their attitude to risk, with a further 30% saying they were optimistic and another 1% very optimistic.
Of the remainder, 23% were somewhat pessimistic and 6% consider themselves to be pessimistic.
This was also reflected in their views on the opportunities available across investment markets, with 82% of respondents giving a positive view.
In total, 44% said they were somewhat optimistic about investment opportunities in the coming year, with a further 37% optimistic.
Alex Barry, Head of UK Sales at Legg Mason Global Asset Management, said the results showed the dilemma wealth managers currently face.
“Having seen so many assets appreciate meaningfully throughout 2017, it is understandable wealth managers may be adding some protection to portfolios now,” he said.
“Nonetheless, with interest rates near record lows, the environment remains supportive for investors keen to take some risk to achieve a return above cash, and we could see a continuation of the current trend for some time to come.”
Barry does note however that Legg Mason affiliates are finding exciting opportunities in some specialist sectors, for example in emerging market debt and on the structured product side.
For example, Western Asset Management Deputy CIO Michael C. Buchanan highlighted select high-yield bonds, emerging market local currency bonds, and structured and bank loans
“There are still opportunities in fixed income,” Buchanan advocated. “That’s not very apparent when you just look at the overall fixed-income market metrics, but we are finding pockets of opportunity and taking advantage of those opportunities for our clients.”