Relative value opportunities
We will never invest in value for value’s sake. Manager selection is critical.
We have seen managers that have not only outperformed their respective value benchmarks but also the market as a whole.
In this environment, we are very excited to find managers who are outperforming benchmarks, and still hold the extra margin of safety of having a style that has underperformed over the last decade.
In this vein, we recently added to British Empire Trust, which looks for undervalued closed-ended funds or holding companies on a global basis.
The portfolio management team is world class in applying its dedicated approach of finding companies trading at a discount to net asset value, and it looks for catalysts which will narrow this discount. This is an example of a value manager that has consistently performed well, despite difficult conditions.
The trust is not only at a discount, but the discount on the underlying companies is at a three-year high, thus providing an attractive double-discount.
We have also taken a new position in the Pacific G10 Macro Rates fund, which is an innovative new fund managed by a team we know closely, formerly of Aberdeen Standard Investments.
The edge of this strategy is not finding out, for example, what the Fed’s next move will be or the outlook for Japanese inflation, but the team’s expertise lies in understanding pricing structures by building their own models and taking a series of trades to exploit idiosyncratic risks.
In volatile times, this strategy provides a vehicle to capitalise on prevailing macro uncertainty.
Vincent Ropers is co-portfolio manager of the TB Wise Multi-Asset Growth fund