4 April 2007

Imminent and severe market correction

A leading UK fund manager has sold off about half the equities in the portfolios he oversees in anticipation of an imminent and severe market correction.

Ken Murray, the founder and chief executive of Blue Planet Investment Management, has revealed he has offloaded equities and cut the gearing on the firm's portfolios to zero in the belief a US economic recession is set to wipe more than 20 per cent from the value of global stock markets.

Blue Planet, a specialist investor in the financial sector with $350m of assets under management, operated three of the four best performing financial funds in the UK last year, according to figures from Bloomberg. Its Worldwide Financials fund was the best performing investment trust in the UK and the world over the last three years. About 25 per cent of Blue Planet's portfolios are now in cash.

Mr Murray warned the impending market correction was likely to be considerably more severe that either of the two most recent downturns that began in February just past and in April last year.

Mr Murray, who began the share sales two weeks ago after the latest downturn, said a consumer spending slowdown was already under way in the US. Combined with rising inflation and a slowdown in corporate earnings, this would drag the world's largest economy into recession.

"People don't want to believe bad things will happen but the market will correct very sharply," he said.

"It is time to get out of the market and I don't think it would be unreasonable to expect the market to fall by more than 20 per cent in a very short space of time".

Mr Murray has built a reputation as one of the UK's most successful investment trust managers. He has combined his role of chairman and chief executive with an active role as an asset allocator via his position of head of investments.

A leading figure in the Scottish financial establishment, Mr Murray founded Blue Planet in 1994. Prior to that, in 1990, he established the Bank of Edinburgh and led the move to consolidate the UK's fragmented building societies sector.

Bank of Edinburgh bought the Heart of England Building Society before being swallowed up by Scottish Amicable.

Mr Murray said investors could ill afford to ignore warnings from the likes of Alan Greenspan. The former chairman of the Federal Reserve warned earlier this year that the US faced the risk of recession.

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