Andy Merricks is the head of investments at Skerritt Consultants.
Q: Has the large number of fund launches this year surprised you, considering the market conditions?
A: The houses that have launched new funds have been clever. If you launch a new fund in a depressed market, with a good manager, it will perform very strongly in the first 12 months. It is much easier to put together a new portfolio with a blank sheet of paper than manage existing assets, especially if you have issues with liquidity. I am surprised that so many groups have launched funds, but those that have will be very pleased with the results in 12 months’ time.
Q: Which new funds have particularly caught your attention?
A: Artemis Strategic Assets has been very good. We have invested in the Octopus Absolute Return fund from launch, and we like the Ignis European Absolute Return and Argonaut funds.
Q: Are there too many funds?
A: No, it is our job to identify the better ones and the ones we want to invest in. From a fund provider perspective there are probably too many, and I expect to see some merging and rationalisation over the next year.
But from a fund selector perspective, I would always like there to be as many as possible.
Q: Which asset classes have stood out?
A: We have done really well from heavy investment in the bond market in the last 12 months, both corporate bonds and high yield bonds.
We have been pleased with the performance of gold and pressed metal ETFs [exchange traded funds], and benefited from getting into oil when others were avoiding it. And I like absolute return funds.
Q: With the large number of absolute return funds launched this year, do you think appetite for this sector will dry up?
A: No, not while the markets are volatile and the funds are doing so well. The future for absolute return depends where the markets are going. I personally do not think this is a sustainable rally, so absolute return is the place to be. But in a long-term bull market, investors will want to be exposed to equities.
Q: Do you share the concerns expressed by other advisers about the large amounts invested in corporate bonds?
A: No, I am more than comfortable being heavily invested in bonds, and have always used them as a proxy to equity markets. The fear of default that caused bond prices to fall so rapidly has almost gone, and they deliver a sustainable yield.
Q: What type of bonds are you investing in?
A: I do not like gilts, and the lower yielding top investment grade bonds are not at the top of my wanted list, but will look to go back to them if the market contracts. I like high yield and BBB rated bonds at the moment, but in this market, you have to be prepared to change your mind rapidly.
Adviser focus: Mark Dampier