CFP SDL UK Buffettology, LF Odey Continental European and Veritas Asian are among some of the top-rated funds overseen by an Alpha Manager that have significant proportion of the portfolio invested in cash.
Nevertheless, there are still funds and managers that are taking a more cautious stance, sitting on significant piles of cash they are ready to put to work.
Source: FE Analytics
Below, Trustnet takes a closer look at the top-rated funds – those with a maximum FE fundinfo Crown rating and overseen by an FE fundinfo Alpha Manager – with at least 10 per cent of their portfolio in cash.
LF Odey Continental European
The first fund on our list is LF Odey Continental European, a long-only strategy investing in European ex-UK stocks, which has 44.15 per cent of its portfolio in cash, according to FE Analytics data.
Manager Oliver Kelton undertakes more than 500 meetings per year with company management, industry specialists and local brokers to identify companies that have a competitive position, strong industry dynamics and cash generation that will drive share price performance.
From this process, Kelton builds a portfolio of 20 to 40 mid- and large-cap stocks, but will also hold high levels of cash in the fund.
During the past 12 months, the £144.9m fund has made a 1.07 per cent loss compared with a 15.28 per cent gain for its MSCI Europe ex UK benchmark. It has an ongoing charges figure (OCF) of 1.25 per cent.
MFS Meridian Prudent Wealth
Next on the list is the $3.4bn MFS Meridian Prudent Wealth fund managed by Barnaby Wiener, which has 36 per cent of its portfolio in cash.
It invests in undervalued quality companies based on a fundamental bottom-up approach, but actively uses cash, derivatives and fixed income to manage equity market exposure and downside risk.
“[An] important part of our philosophy is a very deeply held view that the safest way to generate long-term returns to investors is to avoid losses,” said Wiener recently. “We do that partly through holding cash.”
Performance of fund vs benchmark over 1yr
20191121_top_funds_managers_cash_2
Source: FE Analytics
Over the past year, MFS Meridian Prudent Wealth has made an 11.38 per cent total return, compared with a 16.59 per cent gain for its MSCI World benchmark. It has an OCF of 1.27 per cent.
Veritas Asian
Alpha Manager Ezra Sun’s $2.4bn Veritas Asian fund is next on our list, with cash holdings of 14.7 per cent of the portfolio.
Sun invests in a concentrated portfolio of stocks and is focused on long-term winners.
“There is no denying that the macro picture for Asia as a whole has become more challenging,” Sun wrote recently. “However, as always there are winners and losers in any environment.
“Our job as investors is to identify the longer-term winners and back them when the price is right.”
Veritas Asian has made a total return of 23.98 per cent over the past year, compared with a 13.92 per cent gain for its average IA Asia Pacific Excluding Japan peer and a 11.95 per cent return for the MSCI AC Asia Pacific ex Japan index. It has an OCF of 0.91 per cent.
GAM Star Credit Opportunities EUR
GAM Star Credit Opportunities EUR holds around 14.6 per cent of its portfolio in cash.
The fixed income fund, which specialises in euro-denominated debt, is headed up by Alpha Manager Anthony Smouha alongside co-managers Gregoire Mivelaz and Patrick Smouha.
“The fund is well positioned to capture high and predictable income, in our view, and given the attractive valuation levels, we feel the fund has scope to benefit from further capital gains,” the managers wrote at the end of October.
During the past year, the fund has made a 4.85 per cent total return compared with a 2.61 per cent gain for the Bloomberg Barclays Euro Aggregate Corporates benchmark. It has an OCF of 1.13 per cent.
CFP SDL UK Buffettology
Alpha Manager Keith Ashworth Lord highlighted that cash levels in his highly rated CFP SDL UK Buffettology fund have fallen to 11.2 per cent in October, having been at 15 per cent in February.
Taking a quality growth approach to investing, the manager – who has licensed the Buffettology name in the UK – ’husbands’ cash for buying opportunities as and when they arise.
The fund has benefited from the outperformance of the quality growth style in recent years. It has made a total return of 15.04 per cent over the 12 months, compared with a 9.7 per cent gain for its average IA UK All Companies peer. It has an OCF of 1.19 per cent.
Performance of fund vs sector over 1yr
Source: FE Analytics
Two other funds, MI Hawksmoor Vanbrugh and Unicorn UK Ethical Income, also have cash holdings of more than 10 per cent (11 per cent and 10.3 per cent, respectively).