Global equities fund managers need experience and a pragmatic approach to overcome the protracted be...
Global equities fund managers need experience and a pragmatic approach to overcome the protracted bear market, says Standard & Poor's recent analysis of European and offshore-based funds.
Since the beginning of the decline two and a half years ago, the US market has fallen by 50% (as measured by the S&P 500 Index), the FTSE 100 by 47.8% and the German DAX by 60.2%.
But according to S&P, few of today's managers have experience of such a deep and prolonged recession. S&P's research identifies the factors which appear to have contributed to the success of previous funds.
The funds that have performed best in this bear market have been those run by deep value managers like Andrew Green of GAM International Growth Fund. These value funds have held up well due to the period of overvaluation preceding the current bear market.
Other funds that have proved resilient are those headed by absolute return-oriented managers who are prepared to hold significant cash and short-term bond positions, such as JO Hambro Global Equity Fund, managed by William Francklin.
Portfolio positioning by market cap is also an important factor contributing to a fund's success. Small-caps have outperformed significantly and consistently over the last three years, with the MSCI World Small Cap Index returning 20.7% over the three years to 1 June compared with the S&P Global 1200 Index, down 12.5%.
Although the spread of returns between the best and worst performing sectors have narrowed considerably, sector positioning remains an area to exploit. It is significant however that sector bets taken by managers have generally been smaller than positions in 2001, says S&P.
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