Gareth Lewis, Tilney CIO said the move was a result of the firm’s growing caution on the prospects for risk assets in the face of slowing growth globally, despite massive injections of stimulus by central banks.
“The risk of policy error is growing as authorities across the developed economies struggle to stimulate demand,” he said, adding that the firm moved tactically overweight to both equities and high yield in the summer.
“We have been keen observers of the growing market distortions created by global monetary policy. With central banks losing control of the macroeconomic environment we believe policies such as QE will become discredited.”
The reason the firm has chosen to put some of that money to work in gold, which it has bought via the ETFS Physical Gold GBP ETC (PHGP), is because of its low correlation to other risk assets.
“It serves as a form of insurance should all the world’s central banks spark a round of competitive currency devaluation by loosening monetary policy further,” Lewis explained, adding: “In a world with low, and even negative, real interest rates the opportunity cost of us providing this protection is low.”
