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Tapering takes hold: the top managers who called it right

Tapering takes hold: the top managers who called it right

The timing of tapering has dominated discussions over the past quarter. Outgoing Fed chair Ben Bernanke ended the speculation on Wednesday as he announced a $10 billion cut in monthly bond purchases from January.

Here we look back at the managers who correctly called the end of year annoucement.

Leading managers, ranging from Franklin Templeton’s Michael Hasenstab to Chris Bullock of Henderson Global Investors, had all outlined 2014 being the earliest date of a change in QE policy.

A manager going one step further and predicting a pre-Christmas announcement was Amundi’s Hervé Hanoune, who oversees the €2.7 billion Amundi Fds Bond Global Aggregate fund.

Speaking to Citywire Global in November, the Citywire + rated manager said much of the market would be caught off guard by the move but he had already positioned to take it into account.

While in the minority, Hanoune was not alone in his thinking. BlackRock’s global chief investment strategist, Russ Koesterich, also foresaw moves towards a taper by the year end.

Koesterich, writing in an investor note, said a moderating of purchases – a slowing as opposed to an ending – was still data dependent but likely to be tabled in the December meeting.

Also among those correctly predicting a slowing of bond buying was on the cards was US equity investor Béatrice Philippe of Fourpoints Investment Management.

The New York-based investor said she was working to a scenario which would see tapering commence over the end of 2013 followed by a full withdrawal during 2014.

Elsewhere, Trevor Greetham, director of asset allocation at Fidelity, was another to suggest Bernanke would use his last meeting as a platform to announce tapering.

Having been surprised by Bernanke’s actions over the summer, where Greetham said Bernanke was ‘making policy on the fly’, he said the ability to ‘ratchet lower’ would become a more pressing topic by the year end.

The pullback in bond purchases has been received by equity markets, most notably due to the Fed's commitment to keeping rates low.

An expectation of rate rises spooked markets over the summer, so Bernanke has been explicit in differentiating the two this time around.

Noting how poor communication had previously caused a negative impact, JP Morgan's Iain Stealey explained the relationship at a conference in London earlier this month.

‘Market conventions broke down in June,’ he said. ‘Central banks were shocked at the extent of the sell-off. Their language wasn’t understood, the market failed to recognise that tapering doesn’t mean tightening.’

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