Temple Bar's Mundy prepares for central bank changes

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Temple Bar's Mundy prepares for central bank changes
ByDavid Thorpe

Alastair Mundy, manager of the £1bn Temple Bar investment trust, believes a stark change is about to occur in equity markets and has revealed how he is preparing for this “new era”.

Mr Mundy said central bank policy is likely to change in the near future, with policymakers retreating from the policies of quantitative easing and exceptionally low interest rates as global economic growth improves.

The fund manager said those policies have aided the outperformance of bonds and those defensive equities that perform most like bonds in the years since the financial crisis.

Mr Mundy said that a change in central bank policy could lead to a period of poor performance from those defensive shares, which are typically consumer goods companies such as tobacco shares, with more growth-oriented businesses performing better.

Alastair Mundy has a very consistent investment style. It is a value style.Darius McDermott

With that in mind, Mr Mundy has been buying shares in banks, including HSBC, which is the largest equity holding, supermarkets, such as WM Morrison, and builders merchants such as Grafton.

Perhaps as a safeguard against the new era happening, the largest individual investment in the Temple Bar investment trust is 14 per cent in UK government bonds, assets that would likely perform well if central banks continue buying bonds and don't raise interest rates.

Mr Mundy’s comments were contained in the half-yearly report of the trust.

The trust returned 3 per cent in the six months to 30 June, according to data from FE Trustnet, compared with 9 per cent for the average trust in the sector in the same time period.

That performance comes in the wake of the trust being the absolute top performer in the sector in the 2016 calendar year, returning 20 per cent, compared with 6 per cent for the sector as a whole.

Over the past decade, the trust has returned 130 per cent, compared with 69 per cent for the average trust in the AIC UK Equity Income sector in the same time period.   

The best performing assets in the trust in 2016 and in the period covered by these results were UK supermarkets and hardware stores such as Grafton.

The Temple Bar investment trust trades at a discount to net assets of 5.5 per cent.   

Darius McDermott, managing director at Chelsea Financial Services, said: “Alastair Mundy has a very consistent investment style. It is a value style, and sometimes that is in favour and sometimes not, but over time the record is very strong.

"He is the go-to guy for that style of investing.” 

david.thorpe@ft.com