Investors should reduce their exposure to cyclical industries, such as industrials, as the current business cycle comes to an end, Perpetual Global Share Fund has said.
The climate of low interest rates has supported a number of sectors, but with the prospect of rate rises in the near future, Perpetual Global Share Fund portfolio manager Garry Laurence cautioned these sectors may not maintain their recent strength.
“We still own a number of quality businesses in cyclical sectors like industrials, but given the late part of the cycle that we are in, it’s prudent to reduce this exposure and ensure we continue to outperform in falling markets,” he explained.
Mr Laurence said Perpetual Global Share Fund had re-allocated its exposure to healthcare and technology companies to protect from the risks associated with the end of the current cycle.
The fund has also increased its cash holdings in response to “concerns about elevated valuations in certain sectors and regions”, the company said.
“I don't think volatility in equity markets has disappeared. There are a number of macro-economic factors still to be played out over the coming months that will no doubt create a stir in the market,” Mr Laurence commented.
“Volatility can distort valuations, and building up our cash position allows us to invest in the right companies at the right time.”
Perpetual Global Shares Fund added that the technology sector in particular was likely to do well as it continues to disrupt traditional businesses.