The forced selling of holdings by fund managers is exacerbating share price falls and creating "incredible" buying opportunities for investors, according to Close Investments.
The firm’s smaller companies head, Deryck Noble-Nesbitt, says fund managers are being compelled to sell their holdings as investors force them to cover their losses.
He says savvy investors and advisers will spot market prospects, declaring “everyone is a seller now so it is better to be a buyer”.
“Many fund managers are being forced to sell their investments,” he says. “Equities go down, people get worried and managers have to start selling their holdings to fund the investors.
“The smaller the company managers are having to sell, the more it affects its share price on the downside. It is a good time to invest because people are desperate to sell.
“If you are just sitting on the other side of that with money then there are opportunities to buy stocks on the cheap. It is like buying a winter jacket in the spring – it’ll be cheap.”
His comments are also echoed by reports some individual investors are forced-sellers. The Guardian reported on June 10 the financier Robert Tchenguiz has lost up to £1bn on the forced sale of big stakes in the pubs group Mitchells & Butlers and the supermarket group J Sainsbury. This was caused by his financial backer, the collapsed Icelandic bank Kaupthing, calling in loans and trying to raise cash.
Noble-Nesbitt, who joined from associated firm Close Private Asset Management in July, says the AIM market, in particular, is presenting excellent opportunities for investors willing to take a risk.
“The AIM market is at more than a 10-year low,” he says. “It peaked in May 2007 and it has probably fallen about 60% since then. It has fallen more than 50% in the last few months. It is a very illiquid market. Everyone is writing it off; saying it’s dead.
“I think people’s appetite for this sort of thing dries up right at the point when it shouldn't. They think the end of the world is nigh.
“I would love to see that relationship reversed. I would love to see investors accelerate their activity during the worst part of the market and stop when it has been rallying for a while.
“The opportunities we are now seeing - it does not have to be AIM it could just be smaller companies – are pretty incredible, if you are prepared to take a risk.”
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