Rathbones' Thomson on investing in current market

Rathbones' Thomson on investing in current market

Economic growth is uncertain and investors should remain defensive, according to James Thomson, who has managed the £1.4bn Rathbones Global Opportunities fund since 2003.

Mr Thomson’s fund has returned 11 per cent in the 2019 year to date, placing it among the top 25 per cent of funds in the IA Global sector in the same time period.

But the fund manager has not reacted to the brighter market conditions of late by increasing his investments into riskier areas.

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He said: "We are generally investing in defensive areas and areas that can grow whatever happens with the wider economy.

"The economic data shows that there is less growth in the world, trend rates of growth around the world are being revised downwards.

"With this in mind, we are avoiding economically sensitive areas, such as commodities, banks and emerging markets.

"Instead we are looking at defensive shares, at the US market and at technology.

"There may be a period of time soon where banks and other economically sensitive areas do well, but I am not interested in short-term trades like that, and over the long-term it is shown that buying growth shares rather than just those that are economically sensitive is the best approach."

Mr Thomson regards emerging market economies as being at the mercy of global growth rates, and so views them as an unattractive investment right now.

Instead he has invested in food maker McCormack, and, which operates dating websites.

But the severe sell-off in UK equities in the wake of fears about Brexit has not tempted Mr Thomson to increase his investments in the UK market.

He said: "I can understand the logic of the view that as the UK market has fallen furthest, it is the market best prepared for a downturn, that buying the cheapest market is a way of being defensive.

"But I am not there yet in terms of buying more in the UK. We have very little exposure to the UK but one recent investment we made is in the shares of Ocado."

He said the company was "the best technology business in the UK" and should be viewed as a tech business and not as a food retailer.

"One of the largest food retailers in the US has licensed Ocado’s technology," he added.

According to Mr Thomson the equity market sell-off in the final months of 2018 had been "overdone" but was the result of investors not wanting to repeat mistakes of the past.

He said: "Going into the financial crisis in 2008, investors were very complacent, they thought it was different this time. 

"I think the sell-off in December was overdone, but was the result of investors looking at the climate of higher US interest rates at the same time as weaker economic data and deciding not to be caught again."

In September 2018, Simon Edelsten, co-manager of the £117m Artemis Global Select fund, had eight per cent of the assets of the fund in cash, as he worried that a market downturn was on the way and felt that holding cash was the most prudent course.