The manager has reduced the fund’s weighting to the asset class from 20 to 12 per cent in the last three months, but says he is putting money to work slowly as, despite the improvement in data, macro conditions are still unfavourable for a sustained global equity rally. "The reason the cash weighting was so high was a combination of a lack of high-conviction opportunities and the backdrop of soft economic data," he said.
"However, corporate profits continue to outperform and investor sentiment is up – plus markets are hitting their pre-crash highs – but my core mind-set is to look at individual companies."
"Obviously, we are not myopic and we have to take in to account where these companies are operating."
"Yes there has been an improvement, but the macroeconomic environment is still fragile," he said.
"Fragile is the word as growth is still below-trend. Investors are more trigger-happy than I have ever seen and the reaction to bad news is ferocious. Obviously, that can provide opportunities but I don’t think we can be over-confident."
Thomson’s more defensive positioning has caused Rathbone Global Opportunities to underperform against the IMA Global sector and the MSCI World index during the recent rally.
However, its longer term track record is much better.
According to FE Analytics, the fund is top quartile over three years, with returns of 36.78 per cent. Its benchmark has made 28.85 per cent over the same period.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
The £210m fund has also been considerably less volatile than both its peers and the index.
Thomson has used some of the cash in his portfolio to increase his exposure to more cyclical holdings in both the US and Europe.
"We have upped our weighting to the retail space in the US and some more economically sensitive industrials."
"In Europe, it is areas such as healthcare and luxury goods. Another area we have gained exposure to is the transport sector in the US."
"Though I can’t talk too much about it at the moment, one of the holdings we have bought recently is the railroad company Kansas City Southern."
"This was primarily bought because it should be a beneficiary of the increase in global trade, especially between the US and Mexico."
"We think that China isn’t as competitive and many companies are moving out and diversifying out of the region. Mexico wage rates are on parity with those in China."
"We like the emerging Mexico theme and so are looking to access it through railroads," he added.
Aside from China, another area of the market Thomson is avoiding is financials, as he feels the sector will not be able to deliver strong returns over the long-term.
"Banks have rallied recently and I think they have been over-bought – but I would say that, wouldn’t I, because I have zero exposure to them," he joked.
"I think it has been artificial growth which has been propped up by central bank stimulus, plus the amount of cost-cutting they have done is only providing short-term growth."
"I have avoided them because, firstly, I don’t think they are easy enough businesses to understand – I think there is a lack of transparency there."
"Secondly, I don’t feel comfortable that the rally is sustainable. I just don’t have the confidence in the sector’s fundamentals," he added.
Thomson says he will significantly lower his fund’s cash weighting over the long-term, but it could take some time before he is fully invested.
"I would expect to slowly lower the fund’s cash weighting, but it is hard to be more specific and say it is going to be going down by X amount by the end of the year."
"We are not running a cash fund, it is an equity fund, and I want to be invested – but I won’t invest in something if I don’t think it is the right opportunity."
Rathbone Global Opportunities has an ongoing charges fee (OCF) of 1.57 per cent and requires a minimum investment of £1,000.