David Jane has made a “material shift” in his TM Darwin Multi Asset fund in anticipation of a move away from unlimited stimulus by the world’s central bankers.
Jane has sold out of the £32.5m fund’s holdings in Asian real estate investment trusts, emerging market bonds and Hong Kong equities while “significantly reducing” its other Asian holdings.
The manager, who is also founder of Darwin Investment Managers, says the shift was prompted by a changing understanding of central bankers’ actions, which was brought into focus when the Federal Reserve said it may start to taper quantitative easing if the US economy continues to improve.
“Going forward in the new environment, we think it is much safer and more rewarding to bet with the central bankers, rather than the old approach of second guessing or betting against them. Using the new lens we can understand the recent market transition from QE unlimited to tapering in a clearer light,” he says.
“QE unlimited meant that owning beneficiaries of easy money such as Asian Reits, emerging market bonds, corporate bonds, etc was a profitable trade and arguably bubbles built up in some of those areas. Central bankers must have been concerned that money was flowing readily into financial markets but less so into the real economy, hence the talk of tapering from the Fed.”
Jane adds that the onset of tapering makes it more attractive to identify “economic success stories” for investment opportunities, rather than chasing the liquidity trade created by central bankers’ unprecedented monetary loosening.
After selling down the fund’s QE-exposed holdings, the manager has been concentrating on finding opportunities in areas of the economy that are recovering and has built up positions in US domestic stocks and, to a lesser extent, UK and European domestic equities.
“This transition has left us with a much higher cash weight than at most times in the recent past, but we make no apology for that for a period of time when all asset classes were falling. This cash weight is now significantly reduced, although still high, as we have made material purchases of equities at the reduced valuations,” Jane adds.
TM Darwin Multi Asset’s cumulative performance to 10 July 2013
|TM Darwin Multi Asset||0.68%||9.16%||13.85%|
|78 / 157||6 / 156||42 / 152|
Source: FE Analytics