Pyrford’s Cousins tops up equities in rare move

Pyrford’s Cousins tops up equities in rare move

Pyrford International’s Tony Cousins has increased the equity weighting in his £2.2bn Global Total Return fund for the first time in seven years, using the sell-off in the first quarter.

The vehicle’s equity exposure rose by 5 percentage points to 35 per cent in February amid the market stress of early 2016, marking the first such increase since February 2009.

Mr Cousins, who works on the fund and is also chief executive and chief investment officer at Pyrford, topped up on existing positions including National Grid, Scottish and Southern Energy and SAP, but could now take profits.

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“Things got much cheaper in February,” he explained.

“It wasn’t quite the bottom of the market, but you follow fundamental measures of valuation and things looked much better value. [Now] we’re probably closer to selling again because equities have recovered.”

The manager focuses on stocks with a high dividend yield, low debt-to-equity and high return on equity, as well as a low price.

“People look at our portfolio and they say, ‘that’s the dullest portfolio I’ve ever seen’,” he said.

“They’re very strong business models that have measures of good return on capital, so they’re low risk, they’re proven and they just grind it out every year. But they’ve got to be cheap.”

However, some of the manager’s old favourites did not fall enough during the turmoil to warrant reinvestment, one such stock being L’Oreal.

Mr Cousins noted: “I sold L’Oreal in 1998 thinking maybe I’ll get a chance to buy this back, but here we are in 2016 and it hasn’t happened yet. But that’s what the process is about – discipline. Identify all the things that meet your quality criteria, but only buy it when it’s cheap.”

Key numbers

35%: Equity exposure in the fund following increase in February

February 2009: Last time the vehicle’s equity weighting was increased

The fund’s fixed income exposure is limited to short-duration bonds as Mr Cousins thought quantitative easing (QE) had made the asset class unappealing in a number of regions.

“Money printing has driven bond yields to absolutely absurd levels,” he said. “History books will write about this time and say, ‘You know what they did in 2015 and 2016? They paid governments to borrow from them’. It’s nonsense.

“Within our bond portfolio, I own bonds but they are exceptionally short duration – one and a bit years. They can’t make you a lot of money but they can’t lose it for you either.”

Mr Cousins sees value in Asia excluding Japan, in part because he thought QE was not needed there.

“They haven’t printed money because they don’t need to print money,” he said.

“They have engines of economic growth that are driving forwards without the need to print money. I think it’s important not to lose sight of the fact that printing money is an act of desperation.