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We've 'no idea' what QE will do, says cautious Mundy
Alastair Mundy, manager of the Investec Cautious Managed fund, says the consequences of quantitative easing are anyone's guess.
‘We thought there was cheapness [late last year] across the Japanese market so did not see too much risk in adding to our exposure.’
Taking selective profits from gold
Gold shares make up a further 6.4% of the fund, with Mundy holding five of the world’s six largest gold miners: Barrick Gold, Anglo Ashanti, Kinross, Newmont and Gold Fields.
‘Three years ago our gold weighting was around 12%, but we have taken significant profits. We are not gold specialists so chose five of the six biggest and most liquid gold operators,’ he said.
Around half the portfolio is in equities, with UK stocks making up almost 35% of that figure. He remains wary on US equity valuations after a strong run, and has just 3.3% of the portfolio in the region, while European equities make up just 1.5%.
Backing Glaxo and Signet
GlaxoSmithkline (GSK.L) remains the fund’s largest single equity holding at 3.3% of the portfolio, while Signet is the second biggest position at 3.2%.
‘Glaxo still has huge opportunities for cost-cutting and it is probably due some luck in terms of creating new drugs after a bad run. Signet had an amazing recession and has gained market share while its competitors have struggled,’ he said.
The other big recent success story has been Mundy’s top 10 holding, insulation materials specialist Kingspan (KSP.L), which has been able to profit from the recovering housing market. ‘It is in one of the biggest secular growth areas and while it is cyclical, it has very strong fundamentals,’ he said.
Over five years to 12 March 2012 the fund has returned 26.98% compared with the FTSE All Share's return of 14.9% and our composite UK equity/bond benchmark's return of 12.8%
Citywire Selection verdict:
Alastair Mundy believes the global economy will only get past its current predicament with pain, be that to savers, creditors governments or taxpayers. He employs various hedges in the portfolio to protect against the worst-case scenario, with a third of the fund in index-linked bonds, Norwegian bonds and gold shares. To counter that defensive stance his contrarian style has led him to internationalise the portfolio in recent months, moving into Japan and sovereign-debt-blighted Europe. This fund can underperform in the short term, but long term its risk averse nature has paid off.
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