Off­shore as­set al­lo­ca­tor takes ad­van­tage of eq­uity re­cov­ery

Weekend Argus (Saturday Edition) - - GOODHANGOUTS - Rag­ing Bull Award for the Best Off­shore Global As­set Al­lo­ca­tion Fund – the top-per­form­ing fund on a risk-ad­justed ba­sis over five years to De­cem­ber 31, 2009

An in­vest­ment man­date that re­stricts the fund to in­vest­ing not more than 50 per­cent in eq­ui­ties is one of the fac­tors that en­abled the Ash­bur­ton Replica Euro As­set Man­age­ment Fund to win the Rag­ing Bull Award in the global as­set al­lo­ca­tion cat­e­gory for the sec­ond year in a row.

With a re­turn of 9.96 per­cent a year (ac­cord­ing to Pro­fileData), the fund beat eight other funds in the global as­set al­lo­ca­tion pru­den­tial sub-cat­e­gory on a risk-ad­justed ba­sis over the five years to De­cem­ber 31 last year. The fund was also the top per­former in the global as­set al­lo­ca­tion pru­den­tial sub-cat­e­gory based on straight per­for­mance over three years, with a re­turn of 5.3 per­cent a year.

The Sarasin CI Glob­alSar Dol­lar Bal­anced Fund, a global as­set al­lo­ca­tion flex­i­ble fund, also had a re­turn of 9.96 per­cent a year over five years, but the Ash­bur­ton (pru­den­tial) fund re­ceived the high­est PlexCrown rat­ing for risk-ad­justed per­for­mance.

Last year, the fund was the top per­former in both the pru­den­tial and flex­i­ble sub-cat­e­gories, with a re­turn of 11.84 per­cent a year over five years and a re­turn of 16.77 per­cent a year over three years to the end of De­cem­ber 2008.

The fund, which was launched in April 2003, is an ac­tively man­aged as­set al­lo­ca­tion fund, with ex­po­sure to global bonds, eq­ui­ties and cash.

Nick Lee, Ash­bur­ton’s chief in­vest­ment of­fi­cer based in Jer­sey, says that over cer­tain pe­ri­ods, the fund’s high cash hold­ing has helped to pro­tect in­vestors’ cap­i­tal.

The fund’s ex­po­sure to eq­ui­ties in­creased from 21 per­cent at the end of De­cem­ber 2008 to 38 per­cent at the end of De­cem­ber last year.

Lee says the fund was rel­a­tively cau­tious at the beginning of last year, when its eq­uity ex­po­sure was as low as 14 per­cent. But the fund in­creased this ex­po­sure to as much as 47 per­cent in July as his­tor­i­cally low in­ter­est rates and the huge fi­nan­cial stim­u­lus pack­ages started to fuel eco­nomic re­cov­ery.

“Eq­ui­ties look set to of­fer sig­nif­i­cantly bet­ter re­turns than cash or bonds, and if we do see some mea­sure of inflation shock this year, com­mod­ity-re­lated eq­ui­ties will of­fer a good hedge,” he says.

Lee says that since the end of last year, the fund has raised its ex­po­sure to Ja­panese stocks.

“The struc­tural prob­lems fac­ing Ja­pan are well known. Among other things, it has an ag­ing work­force and a bu­reau­cratic gov­ern­ment. How­ever, some­times sen­ti­ment can be so poor that val­u­a­tions be­come suf­fi­ciently cheap for ex­po­sure to such a mar­ket to be­come a sen­si­ble op­tion. Re­cent talk of weak­en­ing the strong yen should also sup­port Ja­panese ex­porters,” he says.

“Global in­ter­est rates are still at or near his­tor­i­cal lows in most coun­tries and are likely to stay that way for an ex­tended pe­riod,” he says.

Lee says that even when the ma­jor economies, such as the United States, do start rais­ing their short­term in­ter­est rates, they will do so only mod­estly. “We feel that in­ter­est rates in West­ern economies will have to re­main low in or­der to stim­u­late growth,” he says.

He says Ash­bur­ton ex­pects a stronger global eco­nomic re­cov­ery this year than that an­tic­i­pated by the con­sen­sus view. Ash­bur­ton be­lieves this is be­cause China and other emerg­ing mar­kets are grow­ing rapidly, and the full ef­fects of the un­prece­dented gov­ern­ment stim­u­lus pack­ages are still to be felt.

“Busi­ness con­fi­dence and prof­its are also im­prov­ing, which is cru­cial for a re­vival in busi­ness spending and hir­ing,” Lee says.

He says Ash­bur­ton is not yet con­cerned about high inflation on a multi-year ba­sis, but thinks mar­kets may worry about short-term inflation this year, which is likely to cre­ate in­creased volatil­ity. – Neesa Mood­ley-Isaacs

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