TOKYO (Reuters) - Insight Investment has been reducing the risk profile of its portfolio for most of this year, expecting occasional outsized market moves, due to factors such as monetary tightening and political risks, its investment chief said on Thursday.
“Parties won’t last forever. It’s always best to leave before the end,” said Adrian Grey, global CIO at Insight, one of the investment boutiques of BNY Mellon. [BKBML.UL]
His comments came as Wall Street shares plunged on Wednesday as high flying tech shares tumbled sharply, raising fears among investors of a repeat of major market rout that took place in February.
Grey, who oversees some 600 billion pounds ($793 billion) in assets under management, said his team has been cautious following the February rout.
“We no longer have super-easy monetary policy, the United States is now raising interest rates. So what’s been a big tailwind is now becoming a headwind,” he told Reuters.
“Another headwind is politics. And that is now driving a change in market environment — from a very benign environment with low volatility to a less benign environment with higher volatility.”
Grey said financial markets have been probing around for vulnerabilities in the new environment and found those in mainstream equity markets this time.
“In February, when too many people were betting on low volatility, suddenly the VIX .VIX went crazy. (After that) too many people were investing in emerging markets, assuming they get a nice big carry for no risk. That has blown up in their face.”
The London-based fund manager also said that reduced liquidity in markets, compared to pre-crisis times, has exacerbated the routs.
“Against that backdrop, it’s perfectly normal that every now and then there will be some outsized moves, some panicky moves.”
($1 = 0.7571 pounds)
Reporting by Tomo Uetake; Editing by Peter Graff