‘Marmite’ manager’s waiting game

Brian O’Neill runs the Gartmore Global trust – a “punchy” fund, according to one commentator, though for five months caution has been the watchword. Now O’Neill is ready for more risk.

Brian O’Neill, the manager of the £127m Gartmore Global trust, is biding his time. Over the past five months he has cut back on risk: now he is waiting for the best time to put this risk back in. But the time is not yet right, he says.

The Gartmore Global trust, which was launched in 1929 and listed on the London Stock Exchange in 1956, aims for long-term capital growth through a concentrated portfolio of international equities. At August 31 it had 71 holdings, at the core of which are about 40 stocks that normally represent about 80% of the trust’s assets.

Over both one and three years to September 22 the Gartmore Global trust ranks second out of 37 and 35 trusts respectively in the Association of Investment Companies (AIC) Global Growth sector, according to Morningstar.

Over one year the trust fell in value by 0.13% compared with a sector average fall of 14.61%. Over three years it produced a return of 44.92%, compared with a sector average return of 16.33%. O’Neill says the decisions to move out of financials over a year ago and take profits from the oil and commodities sector earlier this year have both contributed to the good performance.

“We are neutral energy now and underweight materials,” he says. “And we’ve been underweight financials for 15 to 16 months. At some point in time that is going to be the big call.”

According to O’Neill more chief executives of banks in Britain will have to go before confidence in the sector returns. “One has to be very selective in this market and not get suckered in,” he says. “I’m not in a rush. I am biding my time as far as financials are concerned.”

O’Neill is looking for entry points back into the energy and materials sector, but is only buying in “a little bit”. “We are on the look-out for opportunities on bad days. “Overall we have taken a lot of risk off the table. We are not quite ready to go back in. It’s too early to call the bottom of the market.”

The Gartmore Global trust has 13% in cash, well over its normal limit of 10%. O’Neill says when the market does “bounce” he does not want to be holding that much in cash.

Simon Elliot, the head of research at Wins Investment Trusts, says the Gartmore Global trust is a “punchy” fund. “Brian [O’Neill] is genuinely a stockpicker. He has very strong views and he follows it through. I think that appeals to investors.”

Nick Greenwood, a fund manager at Midas Capital, agrees about O’Neill’s “very strong” views, which make the trust, for him, an acquired taste. “It’s like a Marmite trust,” he says. “You either like it or you hate it.” But he says O’Neill’s approach makes “a lot of sense”.

At August 31 the trust’s top four holdings were Oracle and Nestlé, both at 3.1%, and British and American Tobacco and BG Group, both at 2.9%. The fund was 35.5% allocated in Britain, 20.4% in America and 10.8% in continental Europe.