Making money: what the experts think
A bonanza for bears
A hedge fund run by Crispin Odey, the Londonbased investor “who has in effect bet his entire fund on a spectacular market collapse”, has gained 19.9% this year – helped by “outsized bearish bets on equities and government debt”, said the FT. Having watched the value of his fund, Odey European, crumble by 60% from its peak three years ago, after a series of ill-timed “short bets”, Odey is now presiding over one of “the world’s best-performing” hedge funds. More volatile market conditions have also helped other doomster hedgies regain ground. And others, such as Third Point and Bridgewater Associates – the largest hedge fund in the world – are “growing increasingly bearish” and increasing their short positions. The latter’s founder, Ray Dalio, worries about the threat of trade wars, and the risk of what he calls a “bigger impending conflict” likely to be triggered by growing income inequality, economic stress, populism and shifting power in the world.
European questions
A central question for many investors, spooked by political events in Italy and Spain, is what to do about Europe, said Mark Atherton in The Times. Despite easing tension in bond markets, Christopher Jeffery of L&G argues that “the situation still has the potential to turn toxic”. But it’s worth putting Italy’s problems in perspective. As Jason Hollands of Tilney Group points out: “most UK private investors will have very little, if any, direct exposure to Italian bonds, and most European equity funds typically hold only modest exposure to Italian companies”, which comprise only 5.1% of the MSCI Europe ex UK index.
Roaring ahead?
Some European fund managers hoped to take advantage of the crisis to up their exposure to Italian stocks, like Ferrari, which derives much of its revenues overseas, said Kate Beioley in FT Money. Indeed, Miton European Opportunities, which gives the largest weight to Italy of any UK open-ended fund, “has not changed any of its positions” throughout Italy’s election process. Meanwhile, European equity markets remain “substantially cheaper” than the US and have a higher 2.9% yield, said Mark Atherton. If you remain unspooked, funds to look at include Fidelity European Values, Jupiter European Opportunities, Schroder European Alpha Income and Blackrock European Dynamic.