Neptune duo short healthcare

Speaking at the Alpha Generators 2012 conference in London, Mr Alexander said the utilities and healthcare sectors in particular had become overpriced during 2011 as investors moved into more defensive positions.

He said: “Current price to earnings ratios argue that equities are fundamentally undervalued. There was a massive spike in risk levels as measured by the Vix index in 2011, which has kept valuations low.

“If we can keep the markets calm in the next few months then the strong start to the year can continue.”

Volatility measured by the US Vix index was at historically high levels in excess of 30 per cent for much of the second half of 2011, following the downgrade of the US’s credit rating from AAA to AA+ by Standard & Poor’s on August 2.

However, equity markets have rallied since the start of the year, with the S&P 500 index gaining 7.1 per cent to February 7 and the FTSE All-Share gaining 6.4 per cent.

The Global Long/Short Sector fund, launched on November 1, is invested in baskets of stocks representing each global sector, and the managers weight them in line with the allocation of Mr Geffen’s £1.1bn Global Equity fund.

This means that the new fund currently has short positions in utilities, healthcare and financials, which Mr Alexander said was in part down to political risk as governments may be forced to reduce subsidies as they implement budget cuts.

According to its November factsheet the fund was 20 per cent short across these three sectors.

Since the start of 2012 pharmaceuticals giants GlaxoSmithKline and AstraZeneca have seen their share prices slide by 5.3 per cent and 1.6 per cent respectively, in spite of the latter announcing an increased dividend and an extension of its share buyback programme.

On the long side, the fund has 27.9 per cent in industrials and 19.7 per cent in materials, in line with similar high weightings in the Global Equity fund. Mr Alexander said he did not want to have long exposure to market sensitive sectors but was maintaining these exposures as both industrials and materials stocks had continuing potential for outperformance.

“We are bullish on long term prospects but cautious because of volatility,” he added.

Since its launch on November 1, the fund has gained 5.7 per cent, according to Morningstar.

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