Cheap just got cheaper in investment trusts

Cheap just got cheaper in investment trusts

Investment trust managers who have high levels of cash holdings have plenty of “dry powder” to begin picking up good opportunities, Anthony Stern has said.

Mr Stern, an analyst for US-based investment advisory firm Stifel, highlighted several UK-based investment trusts that were set to capitalise on the recent market weakness in the Asia-Pacific region.

Among his top picks are Fidelity Asian Values, Pacific Assets and JPM Emerging Markets Income.

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In particular, he noted that Fidelity Asian Values and Pacific Assets both had substantial cash holdings, approximating to 10 per cent of the net asset value, and low exposure to China.

He said this cash was “available to be deployed as bargains emerge”, adding: “The managers of Pacific Assets continue to hold back from investing. They remain cautious on the market, believing there could be a further downleg and the quality companies they like seem to be holding up.”

However, by contrast, he cited Nitin Bajaj, the manager of the Fidelity Asian Values trust, as someone who has been taking advantage of the recent market volatility to invest in “strong businesses at attractive valuations”.

According to Mr Bajaj, cash levels in the fund have fallen to single digits over August as investments have been made to the portfolio.

Mr Stern added: “Fidelity Asian Values could be viewed as the value pick in the sector, with its low exposure to China, a significant amount of dry powder, and an attractive 11 per cent discount.”

Adviser view

Darius McDermott, managing director for London-based Chelsea Financial Services, said: “Clearly, having cash for spending in a falling market is a great strategy and allows the manager to deploy it accordingly. Also, Fidelity has a strong Asian franchise, with good analysts and research and robust performance across the board.”