Mark Dampier: Despite sovereign debt drag Littlewood still plays it short

The Analyst

William Littlewood's return to the investment world after a nine-year gap in May 2009 caused a stir.

He was a star performer of the 1990s managing Jupiter Income, and the eagerly awaited Artemis Strategic Assets Fund attracted a lot of attention, deservedly so in my view as Mr Littlewood is a first-class manager.

Yet the fund has failed to shine. While it certainly hasn't been a disaster, rising by around 38 per cent, the aim is to beat both the FTSE All-Share index and cash over any three-year period. During this time the All-Share is up 56 per cent with dividends reinvested.

To be fair, these twin objectives are quite tricky to achieve. It essentially means the manager has to take a very flexible approach to the level of risk in the fund, sheltering capital in turbulent markets and taking a more aggressive approach when they are rising. Therefore timing and strategy are extremely important. As such, the fund offers Mr Littlewood considerable scope to follow his views. He can invest in shares, bonds, commodities and currencies, which the manager believes will increase in value. The fund can also use holdings that increase the fund's value if they fall in price, known as "going short".

While flexibility can be a good thing as it gives a manager various ways of making money, it also means there are more ways of losing money.

Although many parts of Mr Littlewood's portfolio have fared well, one area has been a particular drag. Since launch he has strongly believed that sovereign debt, particularly in Western markets and Japan, was vastly overvalued and that inflation would cause falling bond prices. He has therefore shorted UK gilts and US treasuries as well as Japanese government bonds. I argued with him that it was far too early to short sovereign debt, even though I thought he may be right in the longer term. Sure enough, these positions have been costly and he would have beaten returns from the FTSE All-Share since launch if he hadn't taken them.

When I caught up with him recently I found he is as adamant as ever about shorting bonds. His view is that when bonds do sell off it will happen very quickly and many people will miss the trade. On Japanese bonds he remains particularly bearish as they are predominantly held by aging, private investors. When they begin to sell to release capital he believes few other investors will be interested in yields of 0.7 per cent on an investment in an expensive currency. If we are, as Mr Littlewood believes, near the crunch point, the fund is very well placed.

As for equities, he thinks some of the classic defensives have got a little expensive and has moved more into the US with the UK weight falling.

The fund's currency exposure is also interesting with long positions representing 30 per cent of the fund in the Singapore dollar, 12 per cent in the Taiwanese dollar, 11 per cent in the Hong Kong dollar, 11 per cent in the Malaysian ringgit and 17 per cent in Norwegian and Swedish krone. There are also short positions in the Australian dollar, Japanese yen and the euro. Overall the fund is set up to benefit from a decline in sterling.

So how does this fund fit into a portfolio? I have a large weighting in my own self-invested personal pension because although I haven't shared Mr Littlewood's short-term view, I do share his longer-term strategic thinking. At some stage I think sterling will come under pressure, so his overseas currency weightings will start to work well and at some stage sovereign debt will surely go into reverse.

This is a fund for patient investors who think the problems caused by indebtedness around the world will eventually be solved by inflation. The question as ever is one of timing, so I have this fund as part of an insurance policy if things go wrong. I still consider Mr Littlewood to be one of the best fund managers I have met over my 30 years in the industry, so if you do own the fund I think it's worth holding onto. For those who don't, it's worth considering, particularly if your outlook turns more bearish on sterling.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial advisor and stockbroker. For more details about the funds included in this column, visit

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Ashdown Group: Training Coordinator - Financial Services

    £32000 - £38000 per annum + benefits: Ashdown Group: A highly successful, inte...

    Recruitment Genius: Business Development Executive - Affiliates & Partnerships

    £20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Day In a Page

    No postcode? No vote

    Floating voters

    How living on a houseboat meant I didn't officially 'exist'
    Louis Theroux's affable Englishman routine begins to wear thin

    By Reason of Insanity

    Louis Theroux's affable Englishman routine begins to wear thin
    Power dressing is back – but no shoulderpads!

    Power dressing is back

    But banish all thoughts of Eighties shoulderpads
    Spanish stone-age cave paintings 'under threat' after being re-opened to the public

    Spanish stone-age cave paintings in Altamira 'under threat'

    Caves were re-opened to the public
    'I was the bookies’ favourite to be first to leave the Cabinet'

    Vince Cable interview

    'I was the bookies’ favourite to be first to leave the Cabinet'
    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

    Robert Parker interview

    The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor