Robin Geffen has adopted an all-time low exposure to emerging markets in his flagship £532.6m Neptune Global Equity fund, in a strikingly bearish call on the asset class.
The Global Equity fund had just 12.4 per cent in emerging markets at the end of March, according to its most recent factsheet. This compares with a weighting of more than 20 per cent of the fund in emerging market equities two years ago.
Mr Geffen has similar low weightings to emerging markets in the £944.5m Balanced and £79.1m Global Alpha funds. In the latter portfolio, the emerging market positions were slashed last summer from more than 40 per cent of the fund to 10.6 per cent at the end of February 2014.
Neptune’s decision to slash its emerging market weightings has come to light a month after the group rejected industry rumours that it was putting itself up for sale as areas of weak performance took their toll.
The boutique’s traditionally high emerging market weightings had detracted from performance on many of its funds after the US Federal Reserve started dialling back monetary stimulus, hitting the markets.
Mr Geffen said the Fed challenges were behind the team’s reductions in emerging market weightings.
“We fully accept that the eventual US rate timing is a powerful headwind for the emerging markets in general,” Mr Geffen said. “A re-entry point will come in time, and we will increase our exposure to these markets, but this point is not visible yet.”
The majority of Mr Geffen’s remaining exposure to emerging markets is through holdings in Chinese and Hong Kong companies, where he said “low valuations and positive current accounts are very supportive”.
Instead the manager has been especially bullish on US and Japanese equities in the past 12 months. Nearly 60 per cent of the Global Equity fund is now invested in US stocks and a further 22 per cent is in Japanese companies, according to the fund’s latest factsheet. The Global Alpha fund has two-thirds in the US and 20 per cent in Japan.
He said: “We believe strongly in the continued US economic recovery, and a number of our holdings, such as Facebook, delivered very good earnings. We are also of the view the tapering announcement from the US Federal Reserve was a sign of confidence in the economy.
“We are also strong believers in the Japanese monetary policy revolution, as exemplified by Abenomics, with prime minister Shinzo Abe enjoying an extremely high political rating, which should enable him to complete his agenda.”
Geffen’s gamble
The asset allocation shift away from emerging markets comes after a period of lacklustre performance by Neptune founder Robin Geffen’s biggest portfolios compared with their peers.
The Neptune Global Equity fund ranked in the bottom quartile of the IMA Global sector in one, three and five years to April 16, according to FE Analytics. The Neptune Balanced fund has suffered similarly, ranking in the bottom quartile of the IMA Mixed Investment 40-85% Shares sector in one, three and five years.
