In a conference call with investors, Rice listed the four “winning” trades that have become risky as US rates rise and the Chinese currency weakens, noting that investors have “overly skewed” portfolios towards duration, credit and consumer areas since 2009.
He will instead begin positioning his £263m fund towards defensives such as pharmaceuticals and telecommunications which he believes currently trade at attractive levels, and are cash rich.
Rice said: “Our basic thesis is that it will be a classic monetary tightening cycle that will take us from the mature phase of the cycle into slowdown and recession. The clock has now started on this.
“Inflation rising, productivity falling, rising long rates and a strong dollar are all tightening conditions in the only growth economy of the world.”
The heavy intervention of the likes of the ECB and Bank of England have been less successful than hoped and have worked to cause distortions in markets.
“Our nuance is that it will take far less a rise in rates than normal to tip growth into a recession owing to QE and a reduced trend growth rate,” Rice added.
