BlackRock uses gold profits to buy bargain equities

BlackRock, the world's largest fund manager, will use profits it is making in gold and bond markets to seek out bargains in falling global equity markets, its investment strategist said today.

BlackRock's James Holt said: "Gold and bonds are doing really, really well and we're making profits on them and putting these into the asset classes that are getting cheaper and cheaper, which are definitely equities."

Gold shares and gold exchange-traded funds account for about 5% of BlackRock's $83 billion (£51 billion) global allocation fund, according to Holt. BlackRock overall manages an estimated $3.7 trillion in assets.

Gold prices hit records today as investors dumped any assets reliant on economic growth amid fears the US and European debt crises would tip the world economy into another recession.

"Our global allocation fund still likes equities on the whole, but we tend to have had those equities that are either exposed to Chinese growth, which is more sustainable, or the big multinational dividend payers, the ones that have the lowest price-earnings ratios and highest dividends, and pretty strong cash flows," Holt said.

He singled out telecommunications, healthcare and energy sectors as preferred sectors for the fund.

"We have been underweight in US Treasuries and have virtually no Japanese government bonds."