One third of the survey respondents, who together manage in excess of £100bn, revealed they are holding cash across their clients’ portfolios to protect against an imminent correction.
While managers are adopting a more cautious stance as 2017 draws to a close, their attitudes toward risk generally remain rosy.
Some 39% of participants admitted to being “somewhat optimistic” when it came to their attitude to risk, with a further 30% saying they were optimistic and another 1% very optimistic.
By contrast, only 23% of managers said they were “somewhat pessimistic” and only 6% consider themselves to be pessimistic.
And 82% of managers who participated in the study said they were positive about the opportunities across investment markets, with 44% feeling somewhat optimistic about the prospects in the coming year.
The results came as no surprise to Alex Barry, head of UK Sales at Legg Mason Global Asset Management, who anticipates the risk/protection dilemma to plague wealth managers for the foreseeable future.
“Having seen so many assets appreciate meaningfully throughout 2017, it is understandable wealth managers may be adding some protection to portfolios now,” he said.
“Nonetheless, with interest rates near record lows, the environment remains supportive for investors keen to take some risk to achieve a return above cash, and we could see a continuation of the current trend for some time to come.”
Some, like Michael Buchanan, deputy chief investment officer of Legg Mason affiliate Western Asset Management, are skirting the issue and hunting for opportunities in riskier sections of the fixed income market, like high yield bonds, emerging markets local currency bonds and structured loans.
“There are still opportunities in fixed income,” Buchanan said. “That’s not very apparent when you just look at the overall fixed-income market metrics, but we are finding pockets of opportunity and taking advantage of those opportunities for our clients.”
