InvestmentsJun 20 2018

Investec’s Mundy on what worries him more than Brexit

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Investec’s Mundy on what worries him more than Brexit

Alastair Mundy, who runs the £971m Investec UK Special Situations fund and the £1bn Temple Bar investment trust, has said he is more worried about the consequences of a sharp slowdown in the Chinese economy than he is about Brexit.

Mr Mundy uses a deep value style of investing which means he frequently buys the companies most out of favour with the wider market. At present he owns a swathe of companies unpopular with UK investors, including Lloyds Banking Group and RBS, as well as Tesco.

The Temple Bar investment trust has returned an annualised 22 per cent over the past decade, compared with 12 per cent for the average trust in the AIC UK Equity Income sector in the same time period.

But speaking about the future, Mr Mundy said: “Of course Brexit is a worry. But what is it people are worried about?

"They are worried about a recession, well if we just called it a recession, people wouldn’t worry as much. I mean recessions are a worry but I have been through recessions before, the country has been through them.

"There are other things to worry about in the world, there are Trump’s policies, they may be a bigger worry, there are worries about politics in Europe. There are worries about the end of quantitative easing.

"So while Brexit is a worry, it is nothing compared to the potential worry of the credit bubble in China, if that goes wrong it is much much bigger as a threat than is Brexit.”

Mr Mundy said he has prepared the funds he manages on the assumption that interest rates will rise around the globe.

“Interest rates are at the lowest level they have been for five thousand years so they will have to go up. I’m not nescessarily saying inflation will rise, because over the past five thousand years they will have been times when inflation was low but interest rates are higher than they are now.”

Georgina Brittain, who runs the £300m JP Morgan UK Mid Cap investment trust, said “the day after the Brexit vote happened we prepared our portfolio for what was to come, its fair to say the outcome has not been as bad as we feared".

"We have about 50 per cent of the portfolio in UK domestic earners and about 50 per cent in overseas companies.

"We don’t have much in traditional retailers or much exposure to the UK consumer generally. But I think one thing Britain has done throughout history is muddle through, and that will happen now.”