Offshore asset allocator takes advantage of equity recovery
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