Within the past six months, Klempster said he has been increasing sovereign bond exposure, while simultaneously scaling back its equity holdings.
Cash levels across Momentum’s portfolios are also relatively high, with the Factor 3 fund currently containing close to 12%.
The decision to de-risk portfolios was not driven by the general election, Klempster clarified.
In fact, he would rather have exposure in the UK, Japan and Europe than in the US where he is still “sceptical about valuations.”
Markets simply “have been looking a little bit fussy,” he explained.
He has also added strategic puts to provide downside protection against equity markets.
The decision hasn’t been helpful in the UK, he admitted, but “markets have done well year-to-date so there may be too much good news in the price.”
Over the medium to long-term, however, he thinks the case for stock markets remains generally positive.
Still, “this is a classic time to be a bit patient.”
“Don’t overtrade the portfolio,” Klempster urged.
Equity markets “have come quite a long way, but they might be due for a period of introspection,” he cautioned. “Don’t expect them to go up in a straight line.”
