With all the printing of money, sorry, quantitative easing, that central banks have engaged in, it would be easy to suppose that one of the biggest economic threats is inflation. And that threat may yet come to pass if all that money really does start to whizz around the system.

However, at UK-based RMG Wealth Management, its investment boss argues that anaemic credit growth, and weak monetary growth figures, in the UK and several other countries hardly suggest a broad inflation problem will materialise – at least not yet. Heavy debt and public sector austerity programmes will act as a drag on growth, he said.

"Over several years, all those central banks are betting on a 'sugar rush' in the financial markets, but it is not generating [economic] growth. It won't, unless it creates a permanent addition to the money supply," Stewart Richardson, chief investment officer at RMG, who also manages the firm’s RMG Real Return Fund, told a briefing earlier this week attended by yours truly.

His clients will hope that Richardson’s judgement is sound. His fund (sterling, class B) has got off to a slow start this year. Since inception at the start of February, the fund is down 1.59 per cent as of end-March. But two months is hardly a fair period over which to grade a fund in a turbulent market.

Deflation risk

"The risk is more of deflation rather than inflation", he said, citing data such as recent UK M4 money supply figures, which point towards slowing rather than rising monetary expansion.

A day after Richardson spoke, Bank of England figures show that M4 – a broad measure of money – contracted by 5 per cent in March from the same month a year ago and fell by 0.8 per cent from the previous month. M4 retail deposits and cash rose 3.7 per cent in March from a year ago, but, tellingly, M4 lending shrank by 4.3 per cent in March, year-on-year.

Central banks have little chance of reviving flagging growth without supply-side reforms, Richardson argued, as he pointed to the lessons of Japan's long period of stagnation after the end of its housing bubble in the late 1980s and the severe demographic crunch now faced by that country.

And he was scarcely any cheerier about the eurozone. "Despite all the so-called austerity packages, there hasn't been any reduction in the burden of debt at all," he said.

As far as his fund is concerned, Richardson is positioned long of the equity market and long of equity market volatility. As far as European assets are concerned, he is, with barely an exception, on the short side of any trade.

Interestingly, despite his point that companies are now sitting on large piles of cash – but unsure how to use it – he is not a holder of corporate debt. When it comes to fixed income, his preference is for Asian government bonds.

His fund also avoids so-called junk bonds. "Junk does not do well in a recessionary environment so we stay well clear of that," he said.

The RMG Real Return Fund is a relatively small fund so far, with £13 million (around $21 million) of assets; it charges a 1 per cent annual fee plus a 10 per cent performance fee. It holds a mix of assets and requires a minimum investment of £10,000, and is domiciled in Guernsey in the form of a Guernsey protected cell company. The fund’s current largest holder is the iShares Asia Local Currency Bond ETF (20.25 per cent), followed by the ETFS Short JPY Long US$ (9.46 per cent).