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Strategic shelters: how go-anywhere funds are adapting to sell-off

Strategic shelters: how go-anywhere funds are adapting to sell-off

The first few weeks of 2016 have taken their toll on many fund managers regardless of asset class or approach but what about those operating with genuine ‘go anywhere’ agendas?

Our sister site Citywire Selector has taken a closer look at some of most-commonly held strategic bond and Alternative Ucits funds to see how they have fared as the downturn took hold.

In context, over the period December 31 to January 20, gold and global bonds have posted positive performances, with the precious metal rising 3.46% in euro terms, while the Citi World Gov Bond Index grew 1.19%.

Conversely, following the significant sell-off seen in stock markets over the past few weeks, global equities dropped 10.5%, European equities have fallen 11.8% and emerging markets are down 13%, all in euro terms.

Here some top managers share tips and tactics that are putting into practice.

Jupiter JGF Dynamic Bond

Manager: Ariel Bezalel

Year-to-date TR (December 31 2015-January 20 2016): 0.08%

Citywire AA-rated Bezalel has kept his head above water while the waves engulfed many in his sector. The bond market specialist was championed by a number of selectors over the course of 2015 for his ability to tailor the €5 billion Jupiter JGF Dynamic Bond fund to meet investor need for yield while also moderating duration during uncertain times.

Nicolas Moussavi, head of fund selection at Lyxor, said Bezalel significantly cut duration over the course of 2014 but the decision to return in this area has proved timely. Speaking to Citywire Selector in December, Bezalel said putting the fund’s large cash pile to work had also proven a correct choice.

Bezalel also said anticipating ECB action meant the strategic bond fund was buying up bonds which could fall under the scope of the central bank’s bond-buying plans. This saw Cyprus adopted as a core holding over the course of 2015.

Carmignac Patrimoine

Manager: Edouard Carmignac, Rose Ouahba, Frédéric Leroux

Year-to-date TR: -0.44%

The Parisian trio have lost money over the past three weeks but produced top quartile performance for their work on the €24 billion Carmignac Patrimoine. Speaking to Citywire Selector in October, Didier Saint-Georges, a member of the company’s investment committee, pointed to two themes as particularly successful.

He said the firm had reduced equity exposure to a low of 10% in 2015. The maximum the fund can hold is 50%. This action would have sheltered the multi asset fund from the most recent shocks. In addition, the company moderated its exposure to China, particularly with regards to the volatile A-shares market, which also proved a successful play.

H2O MultiBonds

Manager: Bruno Crastes

Year-to-date TR: -5.5%

A tough period for Citywire AAA-rated Bruno Crastes. Despite continuing to dominate the market over longer timeframes - he is ranked first out of 411 managers over three years, the global bond manager has faced some idiosyncratic headwinds in recent months.

Most recently, he revealed to Citywire Selector how his €1.09 billion H2O MultiBonds fund was exposed to the Portuguese market, which has suffered political problems and also ructions within its banking sector. He has 30% exposure to the market but, speaking in November, he said the sell-off seen at the end of last year would cause only short-term difficulties.

Old Mutual Global Equity Absolute Return

Managers: Ian Heslop, Amadeo Alentorn, Mike Servent

Year-to-date: 0.7%

Posting one of the strongest outperformances in relative terms is the Old Mutual trio of Ian Heslop, Amadeo Alentorn and Mike Servent, who have made money on their €4.8 billion market neutral fund over this shorter timeframe.

Heslop spoke to Citywire Selector over the summer about the performance of his long-only global equity fund, which shares a similar investment approach to this Alternative Ucits equivalent. He pinpointed canny stock-picking in healthcare as a particularly lucrative play.

In the interview, Heslop stressed the need to move with markets and the importance of pragmatism, not just during periods of pain, such as we are experiencing now.

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Edouard Carmignac
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