Liontrust: Sell US Equities for Asia and Commodities

Market timing is not something that John Husselbee, head of multi-asset for Liontrust bothers with - instead he sticks to a valuation driven approach

Emma Wall 30 March, 2016 | 1:30PM
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Emma Wall: Hello, and welcome to the Morningstar series, "Why Should I Invest With You?" I'm Emma Wall and I'm joined today by John Husselbee, Head of Multi-Asset for Liontrust.

Hi, John.

John Husselbee: Hello there.

Wall: There is a lot going on out there, isn't there? And as multi-asset you have a global cross-asset view of it. I suppose we better start with the newest news which is gold is on the up. What do you feel about it?

Husselbee: Well, the gold price is up around about 20% in the bullion and 60% if you've been lucky enough to put into gold shares. Now when the gold price goes up in that respect, typically it signals one of two things; there is no inflation, well it's not much of that around if we look where the oil price has been going in the last couple of years; or there is fear in the market.

It is probably more of the latter at the moment. Having said all that, whilst the gold price has gone up, it's nowhere near where it was this time last year or indeed three or four years ago.

Wall: There is of course fear in the market and the not that we're in the business of scaremongering, but there seems to be quite a few different things to be worried about. What are your biggest concerns as a multi-asset investor?

Husselbee: Don't try to get off, being put off by the markets by the short-term sort of emotional behaviour or as the Americans say, the emotional discomfort that's going on at the moment and that discomfort is being caused by two things; the price war that's going on in the oil market.

Clearly, there are low-cost producers, traditional low-cost producers who are trying to get rid of essentially the high-cost producers. Where are they? They are in the U.S. re-fracking, in Canada with the oil sands and also in some of the emerging markets, the offshore deep drilling that's going on.

The other fear that's going on is also in China the hard landing scenario. We know that China is moving from what has a manufacturing economy into a service-based economy and perhaps they are not doing it in a smooth way; indeed, I don't think anyone has in the past. But that's certainly causing some uncertainty in the market. But to us, we don't really think it's new news. We think it's a bit of noise.

Wall: Of course, just because there are uncertainties, it doesn't mean that you can't invest there. Indeed, sometimes when prices come down, they can actually be an opportunity for some investors. So, presumably you're not avoiding emerging markets altogether just because there maybe contagion risk from China?

Husselbee: No. I mean, I think market timing is not something that we actually participate in but valuation we do. We do think there is a lot of empirical evidence to say back valuation in the long-term, that's the way to make money. So, if you are looking for bargains at the moment, look at Asia, looking at emerging markets and look at commodities, not necessarily gold but look at commodities, look where the oil price and other commodities as well.

So, we do think there are bargains to be had there. And the noise that we've seen in the market that's given us an opportunity to top up in Asia, top up in emerging markets. A little too early for us for commodities, but certainly we've got our eyes on that.

Wall: And where exactly will you be selling in order to free up that liquidity to put into those opportunities?

Husselbee: We are selling in the areas of the market that have done well and that's the whole idea of investment management to us; sell those areas, have less of these expensive, look for the ones which are cheap. What's been expensive? What's expensive, obviously the U.S. and U.K. in terms of equities.

What's cheaper? Well, emerging markets and Asia, but also we like Japan and Europe and the reasons why we like them is because there is still monetary easing going on there and they are the places to look.

Wall: John, thank you very much. This is Emma Wall for Morningstar. Thank you for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Emma Wall  is former Senior International Editor for Morningstar