In the current market, it could be the time to turn to a contrarian manager who maintains his distance from the herd and can spot opportunities among hammered stocks.
Hugh Hendry
Hugh Hendry’s investment strategy centres on his view of macroeconomics.
Data from FE Analytics shows his CF Eclectica Absolute Macro fund has made a positive return of 2.12 per cent throughout the market sell-off that started in March. Meanwhile, the FTSE All Share has lost 6.66 per cent.
Performance of fund vs index since 1 March
Source: FE Analytics
"Hendry invests in line with his conviction and it tends to be very uncorrelated to the equity market," explained FE Alpha Manager David Coombs, head of multi asset investment at Rathbones.
"I’m hoping to lose money on him because it’ll mean that the market is doing well."
Hendry takes full advantage of the UCITs IV directive and uses instruments more commonly associated with hedge funds.
"He has an unusual way of looking at things," added Coombs. "For instance he’ll go short on an Asian ship builder to take advantage of a commodity price move. We like that about him."
Paul Thursby
Paul Thursby is another manager used by Coombs in his multi-asset portfolios. He runs Thames River Global Bond alongside Peter Geikie-Cobb, although the fund may have been overlooked by many investors as it is domiciled offshore.
"Thursby thinks that government bonds are overbought so has gone negative duration to express that view," explained Coombs.
With negative duration, the investor pays a coupon on the bond instead of receiving one, in the hope that rates will rise in the future.
Coombs continued: "Even if I have the chance of losing money then I can use the fund to hedge out risks and get something different. It’s been wrong over the last 12 months but I’m not interested in that. I’m thinking about the next 12 months."
Alastair Mundy
Rob Burdett, co-head of multi-manager at Thames River, highlighted Alastair Mundy as his pick of the strongest contrarian managers in the UK market.
Mundy’s approach focuses on finding undervalued stocks in overlooked sectors of the market. His style is certainly not for the faint-hearted as it can take years for value to be recognised, but his funds have served investors well over the last decade.
His Temple Bar Investment Trust has been one of the most consistent UK equity income portfolios in the AIC universe.
"In my opinion, the markets are so efficient these days that there’s next to no intellectual or information advantage," Mundy told FE Trustnet in a recent interview.
"The key to making money is capitalising on other people’s mistakes. Investors have a tendency to sell just because something is going down, which makes the price depreciate even further."
"If they’re selling for a sensible reason, then fair enough; however, very often it’s for a transient reason, which is the area we target."