Cazenove duo buys into commodities

The managers of the £1.2bn Cazenove Multi-Manager Diversity fund have bought into the commodities sector for the first time in six years as part of an ongoing shift away from defensive holdings.

Co-managers Robin McDonald and Marcus Brookes have bought into star commodity fund managers, taking positions in Evy Hambro’s £1.4bn BlackRock Gold & General fund and Neil Gregson’s £1.1bn JPM Natural Resources fund.

Mr McDonald said: “Miners have gone from being market darlings in 2010 and leaders of the market in the past decade to being the most popular short among hedge funds and the most underweight sector in the long-only community. Barely anyone has anything good to say about the sector any more.

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“They have dramatically underperformed, they are undervalued, under-owned and unloved, and those are the types of things we find interesting.”

The two funds make up a combined 2.5 per cent of the Multi-Manager Diversity fund, but Mr McDonald said he might “build that out a little further” as the idea develops.

“It has become quite a contentious call,” he added. “We may be wrong, we may be early, but the market’s expectation right now is fairly low and if for any reason that expectation changed, the shares have a good way to run from a low base.”

The Cazenove managers’ shift away from defensive managers began towards the end of 2011. The duo sold out of funds run by Invesco Perpetual’s Neil Woodford and Artemis’s John Wood, and moved instead into “unloved, undervalued” areas such as banks, miners and consumer-facing sectors.

The move follows a similar call by rival multi-manager firm Jupiter, whose Merlin fund-of-funds team, led by John Chatfeild-Roberts, also opened a position in the BlackRock Gold & General fund in recent months.

The BlackRock fund has been hit hard by the falling price of gold, which has dragged down the equity prices of the miners and gold-related shares Mr Hambro invested in.

In the past 12 months the price of gold has fallen 17.9 per cent, while the BlackRock Gold & General fund lost 29.1 per cent, according to FE Analytics.

However, in recent weeks the gold price has rebounded and Mr Hambro’s fund has subsequently posted a 20.2 per cent gain in the two months to September 2, the data provider said.

Cazenove managers see further bond losses

Multi-manager duo Robin McDonald and Marcus Brookes are maintaining an ultra-low bond weighting and holding almost a third of their flagship Multi-Manager Diversity fund in cash in the expectation of government bond yields rising to near 4 per cent as economic growth improves.

Mr McDonald said: “From our point of view there is a ceiling as to how much gilt yields can rise, and to us it has just become grossly asymmetric in terms of the risk/return profile – there is an awful lot more risk and a lot less return.

“Bond yields have moved up 2.8 per cent and that induced capital losses of 6 to 7 per cent. Next year the economy could well grow at 2 per cent and the equilibrium bond rate is likely to be more towards 4 per cent.”