Newton’s Pidcock ramps up cash to highest ever level

A lack of opportunities in Asia is leading the manager of Newton’s giant £4.9bn Asian Income fund Jason Pidcock to hold his largest amount of cash ever.

The manager currently holds 7 per cent in the fund, up from the previous high of 5 per cent reached just six weeks ago.

“This is a really unusual move for me, since I run an income fund,” he said at a roundtable event.

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But the current lack of opportunities has made Mr Pidcock cautious.

“I am looking at some companies that I want to invest in,” he said.

“There is a Taiwanese company that I am considering nibbling away at.”

However, one country that he has always favoured and done him well, Australia, is still proving to be his investment area of choice.

He holds 33.9 per cent of his fund in the country, his highest allocation ever.

This is his largest overweight, as his benchmark, holds just 24 per cent in Australia.

Australia has been “misunderstood,” according to Mr Pidcock, who suggests investors are cautious about the country’s prospects.

Investors are worried about Australia’s reliance on exporting commodities, demand for which is dwindling given the slowdown in economic growth in China.

This fear has spread into the central bank, the Reserve Bank of Australia, which has lowered its growth expectations for this year by 25 basis point to 2.5 per cent, and cut a similar 25 basis points for the 2015 growth, which is now at 3.25 per cent.

Still, Mr Pidcock’s investment decisions in the country have given him a 2.08 per cent gain in his portfolio this year to October 31, he said. He holds 20 stocks, only one of which is a mining stock, BHP Billiton.

But the returns from Australia have not been enough to outperform the index, the FTSE AW Asia Pacific ex Japan, this year.

Mr Pidcock had been in the top quartile and outperformed the index in three years and five years, but has had a tough year in 2014.

The fund underperformed and dropped to the third quartile, returning 1.91 per cent in the past year, compared to the index’s 5.08 per cent.

Part of this underperformance was due to his lack of investment in India, Mr Pidcock explained. He holds no stocks in the country, while the benchmark holds 9 per cent.

“No companies in India fit the mandate of an income fund, but give it a few years and we may hold Indian companies,” he said.

India’s market experienced a significant rerating this year after the election of Narendra Modi, who won the general elections in May. Not investing in the country has meant that Mr Pidcock has missed out on this upside.

However, Mr Pidcock has recovered in the month to the end of October, as the fund climbed back to the top quartile and returned 4.44 per cent, compared to the index, which returned 4 per cent.