Geneva-based independent asset manager the Forum Finance Group (FFG) has scaled up its equity allocation as it looks to tap the US domestic growth story.
The subject of a Citywire Switzerland profile, the FFG increased its equity allocation by investing in an ETF tracking a US Small Caps index in February.
In the latest investor’s note, CIO Nigel Turner explained this move was made to gain more exposure to the US domestic growth story as well as to add an extra layer of diversification in the US equity space.
Elsewhere in FFG’s allocation, management decided to take preventive measures in order to protect its equity allocation against an unforeseen market correction, the CIO said.
Continuing with the US trend, the group bought out-of-the-money put options on the S&P 500, as it saw the US equity market’s strong run since November.
During this period equities have been overbought at a time when valuations are extended, he said, a factor that has spurred the latest move.
Turner said: ‘We need to emphasise that this trade does not equate a reduction of the equity exposure.
‘Several indicators are showing a high degree of complacency and we decided to take advantage of the cheap cost of protection to hedge some of the portfolios’ risk.'
The group prefers to buy protection in good times as opposed to in turbulent times when hedging costs quickly rise, he explained.