Well before things went wrong for global stocks last year, one $9 billion fund manager decided it was time to play safer, and nothing he sees now convinces him to change that call.

Hamish Douglass, whose Magellan Global Equity Fund beat 99 percent of peers over the past five years, boosted cash to about 14 percent of assets by April to prepare for the “stiff headwind” he expected in share markets. He’d been sensing danger as far back as mid-2014. The stock-picking chief executive officer of Magellan Financial Group Ltd. now has almost 16 percent of his fund in cash, matching the biggest proportion since 2009, and no immediate plans to buy shares.

“We’re happy to bide our time in the cash position,” Sydney-based Douglass, 47, said in a phone interview. “We took a lot of our action well before any of this turmoil started.”

Global stocks began a downturn in May that intensified three months later with China’s shock currency devaluation. The situation got even worse from around the turn of the year as a combination of tumbling oil prices, concern about the slowdown in Asia’s largest economy and a selloff in bank stocks sent the MSCI All-Country World Index into its first bear market in five years. Douglass is still wary, but for different reasons.

The $5.4 billion Magellan Global Equity Fund is the largest of the $9.1 billion in funds that Douglass directly oversees, according to data compiled by Bloomberg. Magellan itself manages A$38.9 billion ($27.8 billion) in assets. The global fund has gained 0.4 percent over the past year to outperform 90 percent of its competitors. The MSCI All-Country World gauge lost 13 percent in that time. The fund returned 17.8 percent per year over five years, beating 99 percent of peers, data compiled by Bloomberg show.

Douglass isn’t sticking to cash because he expects a hard landing in China. In fact, he’s predicting good things for the global economy.

No Collapse

“Our central thesis is that China won’t collapse and that the yuan won’t collapse and that’ll we’ll get a continuation of the economic recovery story in the U.S. over the next few years,” he said.

The issue, as Douglass sees it, is valuations. If the economy recovers and the Federal Reserve gradually raises interest rates, some of the best-loved stocks are going to look overpriced. Once they fall he’ll start buying again, he said.

High-quality shares “are still at very expensive levels, effectively factoring in a zero interest rate world virtually forever,” he said. “We’re holding cash rather than the most defensive equities we would have otherwise held.”

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