Managers of global growth investment trusts are split on whether or not to stay defensive or in...
Managers of global growth investment trusts are split on whether or not to stay defensive or increase their beta following the rise in markets since 12 March this year.
Jeremy Tigue, manager of the Foreign & Colonial Investment Trust, says although he has lowered his gearing level from 11% in mid-March to 8%, he is moving away from less defensive stocks and increasing the beta of the £2bn trust.
He adds: 'While the summer is likely to be volatile, we think we are now past the bottom of the market.
'As a result, I have been reducing the trust's exposure to utilities and beverages and moving into more high beta stocks on a stock-specific basis.'
Brian O'Neill, manager of the Gartmore Global Trust, is still fairly cautious at present, however. He is currently maintaining a beta of less than one on his portfolio.
O'Neill says the trust carried out a large share buy-back scheme last year, leaving the portfolio with more unlisted companies in it than usual, which meant the beta fell below one.
Added to this defensiveness, O'Neill has not been using the £27m of gearing available to the trust, as while he is hopeful the bottom of the market has already been reached, he is not convinced it is yet time to gear up.
In geographical terms, the Gartmore trust is presently overweight in Pacific and emerging markets and has nothing in Japan.
Although Japan has had a good run of late, O'Neill says it is difficult to know what has been driving this and he is not sure the economy is strong enough at present.
However, O'Neill believes there are signs the worst is now over in Japan and it is possible the long-term bear market may finally be past, so he is thinking about the region a lot more than he has done previously.
In Europe, O'Neill is only investing in Switzerland and Ireland at present and does not have much exposure to Germany and France. He says that if it were not for the euro, the whole the European market would be much poorer than it is at present.
Elsewhere, O'Neill is neutral in the US and slightly underweight in the UK, although he has committed more to the UK in recent months as feels, at 3,300, the FTSE has been oversold.
Richard Smith, manager of the Henderson Electric and General Investment Trust, says his focus on growth stocks has remain unchanged recently as he believes a sustained economic recovery is proving elusive.
He adds: 'Generally, higher beta stocks have continued to perform well but the more defensive stocks are not yet offering the yield premium or valuation to make investors switch into these areas.'
Smith has invested some cash into the UK market, in the services sector, where he believes the growth prospects continue to look good.
Within the UK, the trust's emphasis is currently on mid-cap stocks, such as Gallen, which have been performing well of late. He has also retained a significant exposure to the euro.
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