Bitcoin's explosive rise and falls doesn't mean more traditional investors should discount cryptocurrencies entirely and better understanding is needed.
That is the view of RBC’s head of global equities, Habib Subjally, who, in an interview with our European publication Citywire Selector, said that the technology behind cryptocurrencies needs to be understood before investors dive in.
Citywire A-rated Subjally said: ‘Right now, I don’t think I would invest. What is the business model? How many cryptocurrencies are out there now, 1300? New ones are being set up every day.
‘I was listening to a podcast recently and it was about two guys in Australia, who as a joke, set up a cryptocurrency. They were out in a pub and said: "Let’s set up Dogecoin".
'It has a dog on it and of course people trusted it because it had this lovely little dog on it,' said Subjally, who added it is this sort of attitude which makes the sector hard to take seriously.
'However, I think it got a market cap of $1.3 billion. Which would suggest that the barrier to entry is pretty low and we just don’t know the transparency and the regulatory framework.
‘Blockchain is a very interesting technology, but we have to understand it, is it a sustainable wealth creating business going forward? Right now, it’s not something we would consider investing in.’
Don’t buy into themes
Elsewhere, Subjally highlighted retailer TJX as a stock which has done well for the fund over the past five years.
'Most people would say: "that’s a retailer – it’s a bit contrarian." We think the company has a really good management team and their business model is different.
'It’s all about how they source all of this surplus stuff from all the different brands and the proposition they provide to their customers,' he said.
Subjally said the team has held the stock for over five years, while most stocks in the 32-strong concentrated portfolio all sit around the 3-4% allocation mark.
'The management and business model has kept us invested, they have a unique business model and have a management team that thinks long term. Even though we have this stock we tend to not have major themes in the portfolio.
‘What we want is some tech stocks, some industrials, some retail etc. We try and avoid themes because if you want a theme then you can go and buy an ETF,’ he added.
Over the three years to the end of December 2017, the RBC Global Equity Focus fund returned 38.00% in US dollar terms. This compares with a 24.10% rise by its Citywire-assigned benchmark, the FTSE World Europe TR, over the same time period.