Stock markets around the developed world have been on an upward trend for the last 12 months or so, and many experts are concerned valuations are too high and that investors are over-paying for the risk they are taking.
Given the fact that the S&P 500, the FTSE All Share and the MSCI Europe ex UK indices have all returned more than 18 per cent over one year while headwinds such as the tapering of QE, the US debt ceiling and the ongoing eurozone saga are still unresolved, then now may seem like a good time to take profits.
Performance of indices over 1yr
Source: FE Analytics
However Oliver, who manages the CGWM Select Diversity and CGWM Select Global Diversity funds, says equities still represent investors' best bet in the current environment.
"The global economic situation is improving," he said. "Though the recovery is slow and anaemic and will falter from time to time, the path is one of a strengthening economy. All things being equal, that should be good for equities."
He admits a change in interest rates or the possible tapering of QE could cause turmoil in the equity market, but warns there is very little value in the other investable asset classes.
"This is a totally different investment environment to what many of us are used to," he explained.
"It is very hard to call, so we thought: 'Let’s not do that. Let’s step back and think, where do we want to invest?'"
"Do we want to hold cash? No, you aren’t getting anything from it. How about government bonds? No, because of rising yields and when yields are at 2 or 3 per cent I don’t think you are being adequately rewarded for the risk you are taking."
"Commodities? No again. There has been an increase in production and at the same time there has been a slowdown in China and the belief is that China won’t be as commodity-driven as it has been in the past."
"Taking everything else into account, it is clear that equity markets are the place to be, you just have to be a bit more targeted," he added.
Oliver has managed the £68m Ireland-domiciled CGWM Select Diversity fund with Mark Piper since its launch in September 2008.
According to FE Analytics, it has returned 33.93 per cent in this time while the FO Mixed Asset Balanced sector is up 33.97 per cent.
Performance of fund vs sector since Sep 2008
Source: FE Analytics
They also run the $17.3m CGWM Select Global Diversity fund, which was launched on the same date and has returned 42.84 per cent.
Oliver has a high weighting to the UK in the Select Diversity fund and holds the likes of Alastair Mundy’s Investec Special Situations, Richard Buxton’s Old Mutual UK alpha and Simon Brazier’s Threadneedle UK fund – all top 10 holdings.
Although the manager is overweight equities in his multi-asset funds of funds, he says investors should not become complacent.
His funds sit in the offshore universe, but he runs them as if they were in the IMA Mixed Investment 20%-60% Shares sector, never holding more than 60 per cent in equities.
Equities currently make up close to 58 per cent of his funds. He says he is holding back a bit on his exposure to shares as he feels some areas, such as the US, have performed very well without seeing much in the way of earnings growth.
"We will need to see much better earnings growth to see the rally really kick on. Hence a bit of prudence on our part," he said.
Europe is one of the areas to which he and Piper have been upping their exposure recently.
"Europe is the cheapest it has been compared with the US for 30 years. Yes, there is no doubt Europe has its problems, but at the same time those valuations look very good," Oliver said.
The manager adds that although concerns over the future of the eurozone are valid, the odds are in investors’ favour now because prices are so low.
He says that emerging market equities are not a good value play at the moment and that he will only up his exposure to the sector if prices were to fall further.
"There is no doubt that emerging market economies aren’t quite the robust beasts they have been and there are imbalances in certain areas."
"We would like them to get a little cheaper before we buy back in because we want to be fully compensated for the risk we are taking," he said.
"In the meantime we prefer Asia, as we think some economies there will benefit from lower commodity prices," he added.
CGWM Select Diversity has an ongoing charges figure (OCF) of 2.3 per cent and requires a minimum investment of £5,000.
CGWM Select Global Diversity has an ongoing charges figure (OCF) of 2.47 per cent and requires a minimum investment of $5,000.
