Rathbones multi-asset manager David Coombs has increased his net equity exposure after identifying a number bargains following the volatility at the end of last year.
The S&P 500 shed 14% in the final quarter of last year and the FTSE 100 lost 12.5% as concerns over a US-China trade war and various other factors, including the normalisation of US interest rates, combined to devastating effect.
'There is no doubt that 2018 was a tough year for investors, including us,' Citywire A-rated Coombs said. '[But] we managed to dampen the downside and are now positioned to participate in the upside we see for 2019, because contrary to popular belief, that upside does exist.'
Coombs, who manages the £964 million Rathbone Multi-Asset Portfolio fund range alongside Will McIntosh-Whyte, revealed that he recently sold his put options, bought in January 2018, at a significant profit.
'We believe now is the time to utilise some of our risk budget,' Coombs (pictured) said. 'At the slightest whiff of volatility, there can be a tendency to jump ship and make big reductions in risk. But volatility is a friend of the long-term investor, not a foe – it can be present significant opportunity.'
On this basis, Coombs believed the greatest threat to investors could be themselves if they adopt an overly cautious stance.
'We, for one, are ignoring the noise and are adding to some of our equity positions that have fallen but we continue to see long-term opportunity in and where the investment case remains compelling,' he said.
'For us, we see opportunity to buy these names at the cheaper levels recent volatility has provided and wait for the gain. We are comfortable in utilising our risk budget, but continue to ensure we are doing so in the right places.'
Tech and US opportunities
The technology sector is one area which has caught Coombs' attention following its battering at the end of last year.
He has increased his weighting here, although he is still staying clear of bellwether Apple.
'Tech is being needlessly written off in some quarters, but it’s important to focus on the specifics,' Coombs said.
'Take Apple for example, a stock that we do not hold. In our view, Apple has idiosyncratic issues, issues that don’t necessarily translate into other tech names. Our focus is not on tech-related cyclicals but on the disruptors. That differentiator within a huge sector is significant.'
Coombs also still believes the US offers the 'greatest set of opportunities', despite talk of a recession in the world's biggest economy.
He feels worries over the US are overdone for now and is confident the US Federal Reserve will prevent a recession by raising rates less aggressively than the market anticipates.
'It’s interesting how the slightest talk of a recession in the US can lead investors into what are sometimes considered more defensive markets, such as Europe, which makes little sense, given that if the US slips into recession, we’re all going down,' Coombs said.
He is not a fan of European equities in the current climate. '[Instead] we prefer long-term structural growth stories in the US.
'So, while growth is unlikely to be above trend, and notwithstanding a devastating Trump blunderbuss, the US still presents better growth prospects than anywhere else.'
The Mulit-Asset range includes the Strategic Growth fund, which lost 1.3% in 2018 versus an average loss of 1.1% in the peer group.