Here's how this top fund manager is approaching the bear market

Many investors have probably never invested through a share market crash before, myself included. So how has this top ASX fund manager positioned his portfolios?

a woman

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Many investors have probably never invested through a share market crash before, myself included. And even those that were investing through the GFC and maybe even the dot-com crash are probably still baffled at just how quickly the S&P/ASX 200 Index (ASX: XJO) has fallen from its February highs in response to the COVID-19 pandemic.

However, in times of uncertainty it may be helpful to look towards seasoned professionals. Looking at how they have planned to act during this bear market may give us some direction in what we should do.

Geoff Wilson is the chief investment officer at Wilson Asset Management (WAM). Established in 1997, WAM now manages over $3 billion in shareholder capital. This capital is managed across 6 different listed investment companies (LICs) with varying mandates.

What is an LIC?

LICs trade on the ASX just like an ordinary share. However they are essentially a share in a portfolio of assets. This enables investors to invest in a diversified portfolio of assets, which are professionally managed to a specific mandate. Here individual investors can decide which LIC investment style and portfolio meets their own objectives.

What LICs does WAM offer?

WAM offers 6 managed LICs. These include WAM Global Ltd (ASX: WGB) which invests in undervalued international growth companies, while WAM Microcap Limited (ASX: WMI) provides investors access to a portfolio of Australian undervalued micro-cap growth companies and WAM Leaders Ltd (ASX: WLE) gives investors diversified exposure to the ASX 200 and market mispricing opportunities in Australian large-cap companies.

How has WAM positioned its portfolios for this bear market?

In its latest investment update, WAM discussed how it has responded to the current equity market volatility. During February, WAM increased cash levels in many of its portfolios with WAM Microcap's cash position increasing from 15.7% in January to 27.4% in February. WAM Capital Ltd (ASX: WAM), WAM Active Limited (ASX: WAA) and WAM Research Limited (ASX: WAX) also significantly increased their cash positions. This was compared to the relatively stable cash positions of WAM Global and WAM Leaders, with Geoff Wilson citing the highly liquid large-cap nature of these portfolios for the difference in approach. 

It appears that WAM has sold down lower liquidity positions in many of its portfolios, giving it some extra cash on hand. Cash which I'm sure will be put to use at these depressed prices, with Wilson stating in the update that these periods create the best buying opportunities. 

Foolish takeaway

I think selling shares now at low prices to raise cash in order to invest would defeat the purpose. However, WAMs changing cash position does highlight its intention to invest throughout this bear market and I think we will see these cash positions slowly decrease as capital is deployed. This is an intention I also have and believe most people will wish they had when looking back on this opportunity a few years from now.

Motley Fool contributor Michael Tonon owns shares of WAMGLOBAL FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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