Sarasin fund of funds manager Lucy Walker has slashed her position in the US in order to buy into emerging markets and rack up the highest cash levels ever on her funds.
Ms Walker has established her first ever emerging market country-specific positions in China and India within the Sarasin Global Equity Fund of Funds and the Sarasin Global Diversified Fund of Funds. But, she cautioned, such moves did not mean she was becoming more bullish on equities.
The overall equity weighting on the two funds, which Ms Walker co-manages with Sam Jeffries, has been reduced from overweight to neutral as the manager said there were now “risks across the board”.
The cash level on the Global Equity Fund of Funds has been hiked to approximately 7.5 per cent, having been 0.4 per cent at the end of June, and the Global Diversified Fund of Funds now has 10 per cent in cash, as opposed to 1.4 per cent at the end of June.
The cash weighting has been generated largely by selling down exposure to the US, but Ms Walker said she had also been buying into emerging markets, where there is still some value.
The exposure to China was bought in April, when the Sarasin managers invested in the iShares China Large-Cap exchange-traded fund (ETF).
Ms Walker said she thought there was a lot of value available from the larger companies in China, such as the banks, and thought the ETF was the best way to gain access to this.
She pointed out that since she had bought the ETF in the middle of April, the market had gone up by 25 per cent, which she acknowledged was “far better than we expected”.
While the China purchase was the first emerging market country-specific investment made by the Sarasin team, another quickly followed as they bought into the Ocean Dial Gateway to India fund.
Ms Walker said that the fund, run by former Henderson manager David Cornell, was relatively small, but that she and the Ocean Dial management were “completely aligned” in viewing new prime minister Narendra Modi’s reforms as a long-term positive for India.
While the China ETF has been added to both fund of funds, Ms Walker said the India position had not been included in the Global Diversified Fund of Funds because its volatility was too high.
As well as the two country-specific investments, Ms Walker said she had also been adding to the funds’ positions in global emerging markets. This includes the South African-based Coronation Global Emerging Market fund, her top choice for global emerging market exposure.
Managed by Gavin Joubert and Suhail Suleman, the Coronation fund is run with a value bias and a focus on long-term cash flow generation. Ms Walker said the team was “incredibly high calibre”.
The Global Equity fund has returned 41.5 per cent since launch in June 2012 – well above the average return of 29.3 per cent from peers in the IMA Flexible Investment sector, according to FE Analytics.
Global Diversified has also performed strongly and is top quartile in the past year in the IMA Mixed Investment 20-60% Shares sector, the data provider added.
