Hargreave: FTSE will slump to 4,700 in next sell-off

Marlborough’s Giles Hargreave has been building up his cash positions as he expects one more major market sell-off, which will send the FTSE 100 down 10% to 4,700.

The Hargreave Hale CEO (pictured) has built up a 15% cash position in his £90m multi-cap income fund, and 20% cash in his £60m UK Micro Cap Growth fund, in the view markets have become far too illiquid.

Hargreave said he cannot see eurozone leaders coming up with a resolution in the short term to ease the debt burden plaguing the Continent, meaning markets will remain depressed for some time.

“I am sitting on the fence and have built up large cash positions. In this uncertain climate, with no solution as yet to Europe’s woes, I think it is the best place to be as the FTSE 100 is at least going to have another run at 4,700,” said Hargreave.

“In the volatile environment I would sooner have higher conviction in my stockpicking to create alpha while also protecting capital in cash.”

Hargreave said although markets have already taken a beating, with the AIM market down 18.4% year to date, while the FTSE Small Cap index has lost 7%, his fund had produced a positive return after he shifted into cash.

“We have been selling exposure to illiquid micro and small caps to move into cash,” he added.

The Marlborough UK Micro fund is top decile over one year in the UK’s Investment Management Association UK Smaller Companies sector, returning 30.5% compared to the peer group average of 15.7%.

Elsewhere, in his £431m Special Situations fund, which is also top decile over one and three years, Hargreave has halved his industrial exposure from 18% to 9% as he expects the sector to perform poorly in a sluggish growth environment.

Hargreave moved 4% of the assets into gold shares and put the remaining 5% into cash, taking his overall cash position to 11%.

“I have cut down on my industrials exposure, getting rid of names I have had for a while such as IMI and Morgan Crucible, as I feel the slowdown of growth will hit cyclicals such as industrials more than most,” he said.

 

This article first appeared in Investment Week.

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