Europe play bolsters Aviva Target Return
An early play on Europe’s equities and its currency has helped one of Peter Fitzgerald’s newest funds return nearly 10 per cent in less than a year.
A key call on Europe helped the manager’s £600m Aviva Investors Multi-Strategy Target Return fund rise 9.3 per cent since its launch in July last year.
For a number of years Mr Fitzgerald said he had positioned his multi-manager funds, and later his Target Return fund, to benefit from easing measures made by the European Central Bank.
The bank’s president Mario Draghi implemented the policy earlier this year, which involves pumping some €60bn (£43bn) a month into the economy through bond purchases.
“Two years ago it was not a consensus view,” he said.
“But we have had positions in European equities for some time and we have been short the euro too, which has contributed to returns.”
Mr Fitzgerald said he had been able to implement some of his positions through derivatives, including options, which he said had become cheap last year as levels of volatility dropped.
Elsewhere, the manager said a bet on Australian interest rates falling had been beneficial to the Target Return portfolio and would likely keep driving returns.
He said his view on Australia’s link to commodities – and how he expected these to be priced in the coming years – had formulated the thesis for the trade.
“One of our thematic views is that we are in a period where commodity prices will remain lower for longer, which will force a rebalancing and force lower rates,” Mr Fitzgerald said.
“Compared to other developed markets, Australia’s rates are at much higher levels too and we think they will converge to where other developed markets are.”
The interest rate in Australia dropped from 2.5 per cent to 2.25 per cent in February, where it remains for now.
In other areas, Mr Fitzgerald said he was far more optimistic on equities compared to bonds.
However, he has tailored his exposure in various geographies given market highs.
The manager said while he had retained exposure to US stocks, he had bought just consumer-related stocks because of a view the market is underestimating how much low oil prices could drive consumption.
“The [oil price] fall results in lower petrol prices, and with increasing wages too, it will provide consumers with more purchasing power,” he said.
The manager said he had used derivatives – specifically call options – to limit the downside to this trade.
