Magellan moves to cash

Lead portfolio manager Hamish Douglass says cash now sits at about 10% in this and other funds the firm runs.

The last time Magellan materially increased its cash weighting was at the start of the European sovereign debt crisis in early 2010.

“We are lifting our cash weighting to increase the defensiveness of our portfolio in response to the massive compression in risk premia across multiple asset classes over the last 18 months.

"We believe there is an elevated probability that this risk compression will unwind over the next 12 months or so as the US Federal Reserve ends Quantitative Easing (QE) and investors focus on a normalisation of US interest rates. An unwind of the compression of risk premia combined with rising long-term
interest rates could lead to a material correction in credit and equity markets," he says in an update to advisers.