GLG tech fund guards against volatility spike
GLG Partners’ Technology Equity fund manager Philip Pearson has upped his downside protection to cushion against a potential spike in volatility.
Mr Pearson, who co-manages the £104.3m vehicle with Anthony Burton, said while prices looked “overextended in the short term” the increased downside protection is not because he thinks the market will necessarily fall.
“The price of protection is cheap at the moment and you get more bang for your buck,” he said.
“We have more option protection than we generally do. On average we spend 20-25 basis points per month but we are above that now.
“The performance is good enough that we like to have that in there.”
In terms of sectors, the duo has recently increased its exposure to media content, which Mr Pearson said is an increasingly important part of corporations’ business models.
The catalyst for doing this was the launch of the Kindle Fire computer tablet by Amazon, which Mr Pearson claimed is a product that does not need to be profitable to work within Amazon’s overall strategy.
“Not many companies can do this but Amazon can because it can provide content and benefit from the overall life cycle of the product and build the business model,” he said.
Mr Pearson said companies that have content and hardware revenue streams, such as Apple, are in a strong position compared with those that do not.
“Nokia, Motorola and RIM are competing against people who are willing to lose money on hardware and that is where content becomes more important,” he said.
Content positions he boosted recently include ITV, Disney and Perform, which commercialises sports content online.
The manager said since the fourth quarter he has already invested in film-streaming and DVD rental company Netflix and seen it double in price and has since sold the stock for a profit.
Elsewhere, Mr Pearson said cloud computing and social media was another theme he has added to recently, having acquired stakes in Jive Software and Fusion-io, as well as increasing his exposure to VMWare.
The manager said dispersion between returns on stocks is likely to increase once the risk-on rally, fuelled by liquidity measures from the European Central Bank, settles.
“It is a more attractive environment now because in 1995-1996 it was a question of buying the market and selling it in 2000,” he said.
“But now you have to have skill to buy the right thing and understand what’s going on. If you pick the right people you can make a lot of money.”