Equity market slump: what do asset managers think?

As the FTSE 100 disp below 6000 and global equity markets slump, we asked three asset managers for their reaction.For the thoughts of market commentators from the likes of Fidelity and Interactive Investor, read:Buying opportunity or wait for the dust to settle?

Paul Niven, manager of Foreign & Colonial investment trust

We have exposure to a range of underlying strategies, most of which are performing well on a relative basis. Importantly, we have avoided the unwind of speculative excess in Chinese markets and have focused on quality in our underlying holdings, particularly in emerging markets (EM).

We had expected the key risks, which include a US rate rise, the Chinese economy/asset markets and Greece, would lead to a rocky period for equity investors. We also expected a modest ongoing improvement in the global economic situation, accompanied by better corporate earnings with investors rotating from the US.

It seems to us that fears of contagion from emerging markets into developed economies are becoming overdone, and we are taking the opportunity to selectively add to developed market exposure and to lock in attractive longer-term borrowing rates as government bond yields rally.

Emerging market assets appear cheap, however in contrast to some of the developed areas, show little sign of improving underlying fundamentals and we are not inclined to call the bottom of the market in EM assets.

Peter Fitzgerald, head of multi-assets, Aviva Investors

When looking at a chart showing the history of the S&P 500 and 10% corrections - the key point is that we have just had the third longest period without a 10% correction in almost 90 years.

That is the unusual aspect of recent experience, not a 10% (or worse) decline. Generally, full-blown bear markets require recessions and that, for the moment, looks highly unlikely in developed economies. Really the more unusual feature in recent months has been the extended period of relative calm and period of low volatility - the S&P is in a very narrow range.

These corrections can, of course, be something far more sinister, but our belief is this is not the start of a bear market. Our first instinct is this is more likely to represent a buying opportunity and that history will look back at it like that. When that happens, we will all say how obvious it was. It is harder to do that now when you feel you are catching a falling knife.

Jason Stather-Lodge, CEO, OCM Wealth Management

The rate of declines and the sell-off would normally indicate a severe global recession is on the horizon and, taking the last 10 days in isolation, today's markets look negative.

However, we are content the evidence does not suggest anything of the sort (notwithstanding a slight slowdown in manufacturing activity in some of the major economies). Unless something significantly destabilises the global economy, the recent falls will be reversed and further gains will be seen by year-end. We are going to stay invested and keep the asset allocation exactly as it is for now and for the investor with a nerve, this will be reflected upon as great buying opportunity.

If I believe the risks are real, then capital preservation and a move to cash will follow. As it stands today though, we are not heading towards a global recession; we are seeing a slight slowdown in global growth, a reaction to the devaluation of the yuan, and worries about the impact of a slowing Chinese economy on the global growth of mega-cap companies.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.