In a webcast for investors, L&G multi-index manager Justin Onuekwusi (pictured) and L&G economist James Carrick shared their views on the economy and fund positioning.
Asked when interest rates would rise, Carrick said he expected they would increase next May when the Bank of England could time the move with a quarterly inflation report.
However, the team’s views are contrary to market consensus that rates will remain low until 2016.
Carrick said: “We have low inflation and a stagnant housing market so February would be far too early. May will be plausible as we will have had time to assess the latest pay data. August will be too long to wait.
“I know this coincides with an election, so if there is a hung parliament then we will have to wait and see, but if it is a coalition then I expect it would coincide with a rate rise.”
Onuekwusi said he has been concerned about interest rate risk within his five funds. He has been reducing his exposure to UK credit more widely across the portfolios, although he has added a position in L&G’s short duration corporate bond fund.
He warned investors should not dismiss the effect an interest rate rise would have on equities, as well as fixed income.
“US equities tend to fall by 8%-10% in the short term (after a rise) so we will be reducing our equity exposure during 2015,” he said.
