Respected fund supervisor is taking a step back from equities and into loan securities and gold
Share market segments have seemed to be buoyant recently, boosted by positive information from over the sea. As Greece and Germany make a common front, many market movers and shakers are anticipating a new all-time-high for the FTSE 100.
But veteran fund supervisor Sebastian Lyon of Troy Asset Management is cautioning traders not to be too rash. Lyon, who manages the Gold-rated Individual Assets Trust (PNL), is selling out of equities, preparing his stock portfolio for a marketplace rectification.
The fund director announced that existing market situations remind him greatly of the pre-dot.com bubble Britain, well before the stock market crashed. "Before the internet financial crisis stocks and shares benefited from an 18-year booming sector, making entrepreneurs ten times their investments. But when we launched Troy in 2000, I had a look at that and realised 'that is not a long term solution'.
The equity market was reaching a plateau and I assumed a stock portfolio fully invested in equities would not be ready to deliver extended revenue - and I had a point. I feel exactly the same about offshore equities marketplaces today," he says.
Lyon told us that the stock trading industry was too trusting in the theory that stock marketplaces will permanently move further up - and that asset supervisors and economic advisors were wrong not to expose shareholders to reality.
"The stock industry is guilty of being overconfident and doing too little," he said. "Shareholders are agreeing to more financial risk than they can, and it worries me." Lyon has not purchased bank stock in fifteen years, and says he presently dislikes mining and medicine firms as they need too much capital expenditure - on exploration or development and research - to ensure upcoming proceeds.
Lyon's privately-owned fund Personal Assets Trust and open-end fund Troy Trojan often underperform in a stock exchange price increase, but investment protection in a plummeting market makes up. There was a blip not too long ago, however, when Lyon set the portfolio too carefully, allotting a portion of the fund to rare metals when the gold did not deliver.
Now he is certain gold is the correct place to be because "gold is the one currency you can’t inflate". "In times past I have placed the portfolio a little early, being reserved before a stock industry adjustment.
It is painful to be early, you catch some flak, but I would prefer to be uninspiring than lose businessmen income," he explained. Within the last 90 days Lyon has reduced his investment in Imperial Oil (IMO), GlaxoSmithKline (GSK), Berkshire Hathaway (BRK.B) and Sage (SGE) - in their place buying gold, short-dated company bonds and short-term gilts, as well as simply keeping a reserve of cash.
"The stock exchange will return to its long-term median value within the following 2 to 3 years, basic principles reveal we are due a modification," he said. "I am currently moving away from UK- and US-listed shares and converting those equity holdings into capital or hard cash equivalents. It is then merely a matter of sitting, patiently waiting and being in a position to go back in once the marketplace recovers."