Give up on UK property funds and back Stratton Street and Ruffer for decent returns, says Chris Nevile, senior investment manager at Sanlam Private Investments.
Nevile’s Capital Creation portfolio has been running with its lowest weighting to equities for two years, at just 35%. The manager expects to increase his exposure in the near future, however, as he believes equities look reasonably valued and that the recent US election has added certainty to the markets.
‘The US looks a little bit cheap and Japan looks absurdly cheap,’ he says. ‘I think we will be allocating more to America and more into emerging markets, possibly into Japan. Europe also looks incredibly good value.
‘We take a very scientific point of view and once you look at the fundamentals, you see there are a great deal of attractive, high-quality investment opportunities to exploit.’
Nevile often uses exchange-traded funds (ETFs) to access equities and likes to spread exposure across the most commonly used ETFs, such as Vanguard, iShares and db x-trackers to reduce individual stock risk.
The portfolio also has 13% in commodities, 11% in property, 7% in cash, an 11% weighting to alternatives and 23% in fixed interest.
The portfolio has returned 7.13% in the year to 11 October, ahead of the fund’s targeted 7% annualised return. Nevile describes Stratton Street’s New Capital Wealthy Nations Bond fund as his ‘star performer’ this year.
‘I have owned them for a number of years and I am very impressed with their style and strategy. Andy Seaman [manager] is a great bloke,’ he says.
‘That has done very well for us – it’s the only overseas bond fund we own.’
Absolute return funds have been ‘disappointing’ on the whole, and he has been switching between funds in the area in the hope of better future returns. One fund he has confidence in is the Jupiter Absolute Return fund, a Citywire Selection pick.
‘We have a lot of confidence in [Jupiter’s] Philip Gibbs. We think he is a very good manager. He hasn’t really delivered but he believes the debt situation worldwide is going to cause a massive problem, and his positioning is a good hedge for us.’
‘It’s difficult for them because they are running a big amount of cash. I don’t think the UK property sector looks good,’ he says.
However, he says he has ‘high hopes’ for the Ruffer Total Return fund, and greatly admires the team. ‘I like their approach to things, they do tend to be brave.’