P2P fund manager cuts regular fixed income exposure as inflation worry kicks in

By Daniel Lanyon on Wednesday 29 March 2017

Alternative Lending

Amid Brexit and Trump induced inflation expectations, Thesis Asset Management is cutting its holdings in regular fixed income markets.

Thesis Asset Management is slashing its exposure to fixed income across its range of seven model portfolios as uncertainty has increased over the outlook for inflation and interest rates.

The firm was one of the first investors into the listed Alternative Credit funds offering exposure to P2P lending through its 7.5 per cent holding in the P2P Global Investments trust.

Now with bond prices, which reached record highs in the third quarter of 2016, fell during October and November, and Thesis believes greater fiscal stimulus has the potential to stoke inflation.

Consequently, it has sold out of the Blackrock Overseas Corporate Bond Tracker Fund it previously held across its funds.

“We continue to see significant risks in fixed income, and so reduced allocation to the asset class across all mandates,” said James Nield, office director and investment manager.

He says the firm had briefly considered adding a little to fixed income exposure, but with the election of Donald Trump to the Whitehouse and the subsequent trend of rising inflation, they reversed course.

“Mounting inflation, in conjunction with higher oil prices and rising wages, means central banks will have less flexibility to keep interest rates low, even where they have the firepower to do so,” he said.

“The BlackRock fund has been sold as the overseas currency exposure had served its purpose and the UK credit market now seems more attractive for sterling investors.”

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