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The funds to back as markets falter
by Charlie Parker on Aug 19, 2011 at 10:55
Start buying, but do it slowly. That was the advice to Wealth Manager from Dominic Rossi (pictured), the chief investment officer for equities at Fidelity International, last week.
No doubt the investment floor at Fidelity was possessed of a zen-like calm over the past two weeks as markets gyrated wildly within a 1,000 point intra-day trading range.
‘This is the eighth time in my career I have been through a 20% experience. The advice is always the same, it gives long-only fund managers the opportunity to buy the stocks they have always wanted to own but have felt the valuations were too stretched,’ said Rossi.
‘The best thing you can remember is that first of all, in these situations your trading costs rise. Therefore it’s best to keep dealing low rather than chase the market upwards or downwards. Markets never bottom in one day – it takes several months for a market to establish a bottom, so as a portfolio manager you should identify those things you want to buy and seek to buy them over a period of several months.’
Sage wisdom, but what funds are cool heads buying in these markets?
Gary Potter (above), the co-head of multi-manager at Thames River Capital, is one veteran who has seen his way through many a market correction.
Potter has been out incrementally topping up positions. He is clear about his response. ‘What you don’t want to do is start panicking into low-risk assets. We are not selling equities to buy more bonds. That’s quite a foolish trade and would have looked foolish with the FTSE at 5,000.’
Instead, he has focused on buying funds invested in stocks with plenty of yield and mostly of a large cap value character.
He has purchased some holdings in Standard Life UK Equity Income Unconstrained. This fund, managed by Tom Moore, has had a great year, returning 22.93% compared to the return of 16.67% of the FTSE 350 High Yield index. Unlike most equity income managers, Moore has invested in a variety of mid cap names such as Melrose in his hunt for returns.
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