Hodges, who is UK head of unconstrained fixed income at the London-based arm of the Japanese asset management group, said if Trump won the US presidency and began a trade war with China, there would be widespread and severe implications for global markets.
Posing a risk for next year rather than immediate pain, he said if capital controls were put in place, stemming money flowing into neighbouring markets like Australia, it could be a potential time bomb ticking.
Likening the sector to a Ponzi scheme, Hodges said: “The Australian housing market is the most leveraged thing in the world right now. If that money stops coming in from China, that is a huge risk.”
Frustrated with the ‘Catch 22’ position of his fund – too small to be taken seriously by leading fund buyers and therefore not a current focus for Nomura AM’s global marketing efforts, which would in turn help the fund gather assets – Hodges said he had been enjoying returns from a number of distressed assets recently.
Bonds from the oil and gas sector, Brazil and Mexico were particularly positive.
“I’ve been buying some of these bonds at 58 cents and selling them three months later for 95. A lot of returns have been taken recently.”
He thinks the European Central Bank will not extend its quantitative easing programme in March next year.
“I don’t think they will come out and say they are stopping it, but I don’t think they will do any more.”
This, coupled with the Federal Reserve’s March 2017 rate rise he expects, will be a “perfect recipe” for a decline in risky assets, including equities.
Meanwhile, he said the departure of Blair Mason, and the subsequent appointment of Yuji Maeda as head of UK fixed income should have no direct impact to him or his role, he believes it will be beneficial to him – in the sense Maeda will be based in London rather than Tokyo and the two can exchange their insights more immediately.
Mason has left the company to join FM Capital Partners.
A statement from Nomura said: “We have appointed Yuji Maeda as head of UK fixed income, Nomura Asset Management UK in addition to his existing role as the chairman of NAM’s fixed income investment strategy committee.
“Yuji’s appointment will help create a more efficient structure and further strengthen our fixed income portfolio management capabilities in the UK. He reports to Masahiro Kawagishi, chief investment officer, global fixed income based in Tokyo.