Top global equity managers steering clear of energy and banks

While hedge funds were much maligned for this practice, the team at MFS believe that shorting serves a useful function. When there may be valid concerns that are causing the hedge funds to drive the price of a certain stock down, Morley and Kottler believe that  armed with an in-depth knowledge of a business they are able to see beyond the short-term pressure and decide whether or not the company’s brand is strong enough to withstand such pressure.

‘The great luxury we are afforded is that we can take a long term view. The market can become over concerned with short term issues such as weak consumer data, but these things are transitory, we look through the near-term noise,’ said Morley.

Turning to emerging markets, the fund owns ‘a smattering of emerging market banks’ as they believe that as credit penetration grows in these countries they will begin to play a bigger role.

‘Our only issue on a stock by stock basis is that they are looking expensive,’ said Morley.

In terms of geographic breakdown the fund owns bank stocks in India and Brazil but stays clear of Chinese banks as the team believe they have ‘governance concerns’ and consider them to be a little expensive.

The fund also owns Standard Chartered bank which despite being UK listed is also an emerging market bank. A similar process is applied in Europe where the fund owns Austrian listed Erste bank which has emerging European market exposure.

Over a three year period the MFS Meridian Global Equity Fund fell by 7.76% against a loss of 17.95% from the MSCI World index.