While on a physical basis equities make up around 35% of the Edouard Carmignac-led fund, the net exposure was cut dramatically following last summer’s China-led market volatility – to zero last month.
This net figure has since been increased to 8% though only though a removal of some hedged positions.
The belief is that markets are looking expensive with the biggest risk to global investors not China’s turmoil, but rather the US Federal Reserve’s loss of credibility given bad data coming out of the US, particularly manufacturing and industrial output.
“We have rebalanced to US treasuries over the past six months, with the benchmark yield of 10-year debt at 1.7% offering some safety, while also looking to credit which remains an interesting space for active investors,” said investment committee member, Jean Medecin.
“A big chunk of that credit exposure is in European financials, which are the only banks still in their deleveraging phrase.
“For example Intesa Sanpaolo, Credit Agricole, Credit Suisse and BBVA now have improved capital ratios and they have a skew now to retail banking, and therefore more transparency.”
Where the investment team have allocated to equities, it is to companies with earnings that are not dependent upon the macro outlook. For example, favourites include healthcare and in particular technology names such as Alphabet, Facebook, and Tencent in China.
Medecin also issued a warning to those investors who have been flocking to European equities as a diversifier: “Europe is actually very strongly coupled to the US; there is no such thing as Europe as a safe haven.”