Donald Robertson, co-manager of SVM’s £60m Global Opportunities fund, is maintaining a long-term investment horizon in the face of “irrational” market behaviour. Since the end of August, Robertson has left the multi-asset portfolio largely unchanged, with marginal increases in exposure to private equity and cash.
“Risk appetite is zero and everything has been beaten senseless, irrespective of if it is trading on high or low discounts,” says Robertson. “We split the fund so 50% of it is market sensitive and 50% is non sensitive. It should be defensively positioned, but you would not know it from the performance of the underlying funds.”
In particular Robertson points to trading in Cambium Global Timberland, an investment trust focused on forestry managed on an environmentally and socially-sustainable basis. Robertson, who bought into Cambium six months ago, includes the trust within his “hedge” allocation because of its supposedly low correlation with other asset classes.
However, according to Financial Express, the trust fell in value by 11.5% in the five days ending October 3, after a run of low-volatility weekly returns. In the same week, the Association of Investment Companies’ Forestry & Timber sector fell by 4.5%, while the FTSE All-Share declined by just 2.3%.
Within his private equity allocation, Robertson increased his stake in LMS Capital – an investment company listed on the Alternative Investment Market (Aim) which he describes as “bombed out”. LMS Capital sold its largest investment – Energy Cranes International – in March, generating net proceeds of £83m. Global Opportunities targets private equity funds in the realisation phase of the cycle.
Robertson’s most recent purchase was Acheron – a fund investing in endowment policies. The fund is designed to act as a replacement for Global Opportunities’ biggest holding, the £40m Life Offices Opportunities Trust, which will be voluntarily wound up this week. However, Robertson says Acheron will form a lower weighting in the portfolio – about 2%.
As a result of the liquidation, Quorum Oil & Gas Technology becomes the fund’s single largest position. Robertson’s only recent sell was BlackRock Commodities Income, which aims to achieve an annual dividend target by investing in energy and mining companies. Robertson retained his stake in BlackRock World Mining.
While poor liquidity in the investment trust sector makes buying difficult, Robertson says some funds do offer good value. As well as private equity, he is also cautiously upbeat on property. In particular, he points to trusts investing outside Britain, including those focused on China, eastern Europe and Japan. Two of Robertson’s biggest property holdings – Equest Balkan Properties and Jupiter Adria – invest in South-East Europe.
Robertson is also relatively upbeat on Latin America and China, and pessimistic on the outlook for America and the dollar, relative to the euro and yen. However, big changes in asset allocation are unlikely in the near future.