The DFM has upped its defensive weighting across its Optima fund range to 30% from just 7%. Simultaneously it has trimmed its exposure to value based funds by just over 10% as it believes the opportunities are reflected in their prices.
“It’s not as linked as it may appear to market levels but more about valuation levels within different parts of the market,” said Steven Richards of Thesis. “If we were worried about the market we would simply reduce our equity weighting,” he added.
Richards further explained that the firm has moved into more defensive funds not in anticipation of a market pull back, but in recognition of pricing of the typical stocks and sectors it invests in relative to value or more cyclically biased funds and their typical stock or sector exposure.
Funds that Thesis has been investing in include the Schroder Income fund and the Franklin UK Equity Income Fund, which has a stated mandate of being 70%+ in FTSE100 large cap stocks, Richards said.
“Stocks such as Unilever, Diageo and British American Tobacco, that were all being hailed as ‘expensive defensives’ in the headlines over a year ago, were all seeing their shares prices now well off the 2013 highs whilst many cyclicals were trading to highs,” Richards said. “We therefore felt it only natural that there would be some rotation back at some point,” he added.
Thesis has around £6bn in assets under management.
