Fidelity: We're Selling Gold and Taking on Risk

Fidelity Multi Asset investor Nick Peters on why - unlike many peers - he is feeling more confident about markets and how long he expects his positive outlook to last

Emma Wall 12 September, 2017 | 12:31AM
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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 Nick Peters, Multi Asset Fund manager for Fidelity.

Hello Nick.

Nick Peters: Hi.

Wall: So, you have been taking recently acquired contrarian view, while the rest of your peers are getting concerned about valuations and risk and they are actually becoming more cautious. Recently you've been adding risk, haven't you?

Peters: That's correct. So, if we take a step back - after the Trump rally that we saw tail end of last year, beginning of this year. That was a point where I started worrying about the valuations and whether earnings growth would come through. And we obviously had a decent rally. Markets became nervous about geopolitical risk and about valuations.

And I just felt that looking at the economic data actually the picture looks pretty robust, I think earnings growth looks OK and I felt that analysts are going to start rolling their numbers forward to next year to 2018 and again valuations perhaps look a bit more sensible. So that for me was a green light really to add to equities and take a bit more money out of fixed income.

Wall: And interestingly while another of your peers who I have been speaking to recently was adding to their gold position, you've recently been selling gold haven’t you, which is a real sign of the fact that you are more confident in the market.

Peters: Well, I suppose at the back of my mind was, if I was becoming a bit more confident about the outlook certainly over the next three months or so then it seemed sensible to reduce the more defensive positions in fixed income and gold as well.

Wall: Well, I suppose that’s the beauty of being a multi-asset investor, is that you do have far more levers to pull than the sort of average long-only equity fund manager. Where are you adding risk at the moment, and having said that, where are you seeing these opportunities?

Peters: I mean you are absolutely right. I really enjoy running a multi-asset mandate because there are pockets of value. There is always somewhere where people are selling and you think there is an opportunity. So, actually European equities again had a good run at the beginning of the year then post Macron's election victory we've seen a period of weakness linked to the strong euro as well.

And again, I thought that was a bit overdone and so where I have added to risk is with European equities. Because I think the backdrop again is looking pretty good and valuations – certainly it looks cheap relative to the US.

Wall: Of course, you do also have a fixed income allocation, and although that is becoming more and more difficult to find value in that particular asset class, is there anywhere in particular that you do like within fixed income?

Peters: So emerging market debt local currency is a position we've held for a while now and although I have been top slicing it's still relatively attractive. Global hybrids is another area where Fidelity run global hybrid strategy, it’s a very strong strategy and I have been happy to add to that in recent times as well.

Wall: And I suppose the final question is how long do you think this confidence will last because we're in Q3 now, Q1 you were risk-off, now you are risk on how long will this run last?

Peters: I wouldn’t get carried away, risk-on relative to where I was for sure. And I just think it’s a case of waiting to see what develops as I say the backdrop looks reasonable economically and from a corporate perspective. We think that inflation is likely to pick up towards the tail end of the year and I think that and what happens with the dollar are the two areas we've got to watch closely.

Wall: Nick, thank you very much.

Peters: Pleasure.

Wall: This is Emma Wall from Morningstar. Thank you for watching. 

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Emma Wall  is former Senior International Editor for Morningstar

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