Romick, who manages approximately $20 billion in assets, said he has raised cash to approximately 40 percent of his portfolio, or nearly double the 26.4 percent of cash that he has held on average since 1994. Record high corporate profits will likely fall as interest rates and corporate tax rates rise over the next five years, he added.
"We are about as bearish as we've ever been," he told the Bel-Air Next-Generation conference in Los Angeles, a gathering of high-net worth families and their representatives.
Romick, whose FPA Crescent Fund was named Morningstar's 2013 Asset Allocation Manager of the Year, has decreased his position in high-yield bonds to nearly zero as spreads between them and investment-grade bonds have fallen. He has been looking to increase his positions in private businesses, ranging from farmland outside of Phoenix to container ships, assets that have not experienced the same multiple expansion as the overall stock market.
Among his recent equity purchases: aluminum company Alcoa Inc, which he began adding to in the fall. He has been attracted to the company, whose shares are up approximately 25 percent for the year to date, because it has decreased its capacity, he said.
Romick, who has managed FPA Crescent since the fund's inception, is known as a contrarian value investor with a long-term view, who likes to buy what the crowd is selling and vice versa. He looks for stocks and bonds that are undervalued relative to their expected earnings and returns.
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