While negative real interest rates have driven investors for much of this year into holding equities and “real assets” such as gold, market turbulence has propelled UK-based Signia Wealth to take a bearish equity stance.  

Volatility in global equity markets has erupted amid fears about eurozone and US debt, with additional turbulence coming from developments such as the unfolding rebellion in Libya, for example.

“Going into the summer months we retained an underweight equity allocation due to our concerns about the global economic outlook and the resultant implications for Europe,” said Gautam Batra, chief investment officer at Signia Wealth.

He said the firm has used inverse tracker exchange-traded funds, which make money when markets fall, to reduce equity exposure further.

“Our current equity allocation, which at start of the year was above 50 per cent, stands in the low single digits,” Batra said in a note.

Signia Wealth is a relatively new entrant into the industry, having been established 18 months ago and now oversees a total of around £2 billion ($3.3 billion) of client money. (To view a related interview with the firm, click here).

“We have increased allocations significantly to long dated US and UK government bonds, which have performed very well against a backdrop of systemic concerns and slowing economic growth,” Batra continued.

“Within equities we have retained exposure to a number of key themes, including Japanese reconstruction, high-dividend blue chips, and the Chinese consumer through better quality individual securities, which we expect will deliver strong positive returns over the course of the next 12 months,” Batra said.

The dollar will benefit from a “flight to quality”, rising against sterling and the euro, while Signia Wealth has also used the Japanese yen as an “effective safe haven asset”, he said.