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Multi-asset outperformer cuts HY and EMD on rates rise risk

Multi-asset outperformer cuts HY and EMD on rates rise risk

Citywire + rated Fabrizio Quirighetti has reduced exposure to corporate high yield and emerging markets in a bid to stave off volatility caused by the eventual Federal Reserve rates rise.

Speaking to Citywire, Quirighetti, who runs several multi-asset and fixed income funds at SYZ Asset Management, said he is conscious of knock-on effects for credit markets from a 2015 hike.

Despite being convinced that rates increase will probably be a ‘non-event’, Quirighetti said he prefers to adopt some protection. ‘Speaking of corporates, in the last few weeks we have removed high yield and emerging risk. Today, we favour equity, especially Europe and Japan.’

The US central bank signalled last Wednesday that an interest rates change will likely happen before the end of the year, but didn’t specify clear timing.

‘We think that a Fed action will increase the rates of short-term bonds, while the long-terms will remain unchanged. That’s because the fundamentals are improving, but the American economy overall is still weak,’ he said.

‘Just to be clear and make an example, if you are an alien and come to the earth without knowing that the Fed rates are around zero, and take look at economic fundamentals, you’d probably think that the US central must cut, not raise, interest rates.’

Golden worries

Speaking of his multi-asset portfolios, Quirighetti said another reason for concern is the falling price of commodities.

‘One month ago, when it was around $1,200 dollars, we sold all our exposure on gold. We still had a loss, but not that terrible if we compare it to today’s levels and where it could be in the next few weeks.’

On the other hand, Quirighetti said he hasn’t suffered from the Greek instability. ‘We cut a bit of our exposure to the country, which was minimal, before the referendum.’

‘But at the end of the day, I think the story has only been a big distraction for the European markets, and that Europe would have survived to a Grexit.’

The largest of Quirighetti’s three multi-asset funds is the OYSTER Multi-Asset Absolute Return fund, which has €604.5 million in assets.

It has returned 13.8% in euro terms over the three years to the end of June, which compares to a return of 17.95% by the average manager in the Citywire – Absolute Return sector over the same period.

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