A rotation by equity managers held within the Battle Against Cancer Investment Trust (Bacit) from core European companies to those in the periphery boosted performance in the first quarter.
The trust is headed up by investment experts including F&C’s Jeremy Tigue and Jupiter’s chief investment officer John Chatfeild-Roberts, and aims to donate money to the Institute of Cancer Research and to the Bacit Foundation for distribution to other charities.
In a quarterly update, the trust’s management team said there had been a small gain for the quarter of nearly 0.2 per cent, compared with a fall of more than 0.6 per cent by its benchmark FTSE All-Share index.
“The first quarter saw a number of our equity managers rebalancing portfolios away from core Europe, international, and growth companies towards the periphery, domestically-orientated companies, and value,” the update said.
“Many domestic European companies are trading at discounts of more than 50 per cent to their US equivalents, and on-the-ground visits and an eye to the tightening spreads in credit markets allowed our managers to catch substantial rallies in the first quarter.
“Our European-focused credit managers, who invest in corporate and property debt, enjoyed the prospect of the European Central Bank reinitiating its credit easing, and our commodity managers, all of whom invest long-short, had a bumper quarter.”
The management team said the trust started the quarter with 85.9 per cent of its assets invested, but ended the period with 96.8 per cent of its assets committed, of which 90.1 per cent was invested in underlying funds. The rest made up its first investment in one of the Institute of Cancer Research’s early-stage drug prospects.
The team said it had invested in several new funds during the first quarter of the year, including Chenavari Corporate Credit Strategy, “to extend the portfolio’s exposure to the opportunities created by the low default rates in Europe, on the back of healing economies”.
“We also added a long-biased fund focused on smaller European companies, PCM Europe,” the update said.
“Finally, we made the fund’s second private equity investment with the initial drawdown by Permira V for 7 per cent of the commitment, following the announcement of six acquisitions since late October 2013.”
The trust’s management team said 2014 started as it had predicted in that it has been a “year for stockpickers” and it was grateful to have such long experience in the portfolio”.
“Both equities and credit are split approximately 60:40 in favour of hedged, versus long-only managers, all commodity portfolios are long-short as are, clearly, the global macro ones,” the team said.
The team acknowledged the setbacks in the Japanese market – driven by large numbers of sellers, and Russia – sparked by the conflict in Ukraine, “detracted from progress elsewhere”.
“The first quarter of the year saw foreign investors sell Japanese equities at the highest rate since the Lehman crisis, pushing relative valuations of Japanese equities to record lows, and creating a buying opportunity,” the team said.