Evans sits on cash in Asia Pacific fund

Cavendish’s Liz Evans is sitting on a huge pile of cash in the group’s Asia Pacific fund as she sees very few investment opportunities in the region.

The cash weighting on the fund has risen from 1 per cent in the summer to 11 per cent now, and could even move higher in the short term.

Ms Evans said some stocks in her portfolio were getting to the point where their valuation is too high and she may have to sell them.

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The manager has been topping up some holdings and buying stocks in Australia and China recently, but overall said she “just cannot find compelling stocks right now”.

The cash level has been raised as Ms Evans has been selling out of stocks in markets such as Thailand and Indonesia, countries which the fund has historically favoured, after they had a torrid time in the summer on expectations that the US would reduce its quantitative easing programme.

The cash weighting has also been raised by a significant inflow of money in October, which saw the fund increase in size by 23 per cent to £103.6m, because Ms Evans has struggled to find suitable stocks to invest that money in.

The Asian markets continue to be in thrall to the question of when the US will ‘taper’ its quantitative easing programme, and Ms Evans said that uncertainty was holding her back from investing in certain stocks.

She said she wanted to be defensive because she was “not sure how much upside there is in the short term”, but added the traditional defensive stocks “are not a safe bet” because they had been huge beneficiaries of loose US monetary policy and will likely fall when the Fed tapers.

She had used the brief rally in September when it seemed that tapering would be pushed back to sell down some positions, which has benefited the fund now that the market expects tapering to happen much sooner.

However, the fund has struggled for performance against its peers and is in the bottom quartile of the IMA Asia Pacific excluding Japan sector in both one and three years.

Ms Evans attributed the underperformance to the fund’s significant underweight position in Australian equities as the Australian market has performed particularly well in recent years.

In particular, the manager has avoided Australian banks but admitted she had “underestimated” how popular they would be with investors, who have been attracted by the high yield and defensive nature of the stocks.

Ms Evans has been raising her weighting in Australia recently but is still very underweight and said she is still avoiding mining and banking stocks, buying companies such as retailer David Jones instead.