Decisions, decisions
While unwilling to disclose names of funds he uses, Barnard is happy to talk us through his positioning with individual managers, one of which has a strong emerging markets focus, another who is successfully trading around commodity prices and a US-based conventional rate and currencies fund.
He continues to think the US is relatively less attractive than other regions, while European equity markets seem more appealing from a valuation point of view.
However, he says: “The big decision in equities is not which region you own or which sector it is but how much equity risk you put in your portfolio and how you structure that equity risk. Is it cash or is it options?
“When I think of the equity decision tree, question number one is how much risk do we want? The next question is how we want to own that risk and only then do you get down to relative weightings between regions, sectors and market sizes.”
Barnard says his stay-rich-plus philosophy originates from conversations he has had over the years with clients, prospective clients, and other owners of capital.
“In aggregate, when they look at their portfolios they are conscious that they are in the position of having substantial wealth they don’t want to lose.
“Equally, they feel an obligation and a desire to do something with their wealth – hence the ‘plus’.”
While many in the wealth management community have taken a more cautious stance in recent weeks, Barnard does not see cash as a significant “defence mechanism” in protecting capital, and says the costs of owning the asset in opportunity terms are too high.
The team expresses currency views through options, which Barnard says can be accessed at attractive prices now sterling has stabilised somewhat after Brexit.
