Henderson’s Chris Burvill is more optimistic about equities than at any time since 2003 and believes investors’ frustration with ‘safe-haven’ assets will fuel the shift into stock markets.

Chris Burvill. lead manager of the £1.2 billion Henderson Cautious Managed fund, is as bullish on equities as he has been since 2003. The fund, which sits in the Mixed Investment 20-60% Shares sector, has 56.3% in equities, 37% in bonds (14% in gilts and AAA-rated debt) and 6.7% in cash.

‘There are so many people on the sidelines – retail, institutional and corporate investors, none of them want to play,’ said Burvill. ‘But the question is for how much longer do they want to keep squirrelling cash or moving into gilts, particularly when they have been proven wrong?

‘If the economy picks up, we have an even stronger argument, and I think it could come through more interestingly than anyone expects.’

Mixed timing

The last time Burvill was so bullish on the equity market was in 2003 and the bottom of the 2000-03 bear market for shares, when the fund was launched.

‘I went in [at the launch of the fund] aggressively with a big equity exposure, which was fortunate timing because it turned out to be the bottom of the stock market,’ he said.

He was slow into the recovery in equities that began in March 2009 and this has affected his risk-adjusted rating (see table above, which shows monthly ratings based on a rolling 36-month period).

Avoiding esoteric assets

Burvill’s investment strategy avoids commodities and property.

‘You shouldn’t dance with strangers,’ he said. ‘My strategy has always been to keep it as straightforward as possible.

‘We hold UK equities, corporate bonds (mainly sterling) and don’t get involved in some of the more esoteric areas. We’ve always steered clear of alternative products, structured investments and have very little futures dealing – only to hedge foreign currency exposure back to sterling.

‘We have no commodities and no direct property. We can be confident that our assets can be priced on good days and bad days.’

The Henderson Cautious Managed fund has returned 23.8% over five years to the end of January 2013, beating the 13.7% of the LCI FTSE 350 High Yield/Brit-Govt 5-15Y (60:40) index. Since launch in 2003, the fund has returned 112.5%, well ahead of the index’s 79.9% rise.