Premier's Evan-Cook turns to absolute return funds

Premier's Evan-Cook turns to absolute return funds

Simon Evan-Cook, who jointly runs a range of multi-manager funds at Premier Asset Management, has been investing in absolute return funds despite the rally in equity markets.

Mr Evan-Cook has been cautious on the outlook for equity markets for some time, a position that helped the performance of his funds in the final three months of 2018.

He said the big driver of strong equity market market returns so far in 2019 has been the decision of the US Federal Reserve, that country’s central bank, to announce that it will not raise interest rates this year.

This boosted equities because it assuaged many investors' fears that an economic downturn is imminent.

Mr Evan-Cook said that while he took the opportunity to buy more shares during the sell-off in December, he remained wary about the valuations of most equity markets.

He said: "This year to date everything has gone up, and that is not great if you want to be a bit contrarian, but what we are doing is looking at absolute return funds.

"The ones we like, and have bought, are those that keep it quite simple, they buy shares they think are going to go up, and short-sell shares they don’t like. We don’t like funds that try to use the macroeconomic environment to profit, I think that is just luck."

Data from the Investment Association (IA) showed that investors have pulled money from absolute return funds for nine consecutive months.

Mr Evan-Cook said: "A lot of the more macro funds invest in complicated ways that we don’t like. We have been buying Jupiter Absolute Return, which is run by James Clunie.

"He takes short positions on shares, and one of his biggest short positions is Tesla, while we also own the Scottish Mortgage investment trust, run by James Anderson, which is a big investor in Tesla, so that’s how we like to do it."

The £1.4bn Jupiter Absolute Return fund has returned 2 per cent over the past five years, compared with 7 per cent for the average in the IA UK Absolute Return sector in the same time period.

Mr Evan-Cook is also buying the £388m Man GLG UK Absolute Value fund, which is run by Jack Barrat.

Mr Barrat began his career working on the Man GLG UK Undervalued Assets fund, which only buys shares on the basis that they will go up in value, and from there created the absolute return fund to take short positions in the shares his research showed him were too expensive.

This fund has returned 5 per cent over the past year, while the average fund in the sector has lost 1 per cent.

Brian Dennehy, an adviser at Dennehy Weller in London, said: "The Targeted Absolute Return sector contains a mixture of funds, some taking on much more risk than you would expect.

"Investors need to be wary when considering this sector. Investors shouldn’t be expecting much higher, stock market-style returns.