Mark Dampier: Don't let past performance cloud your judgement

The Analyst

If you spend any time looking at fund performance tables I suspect SVM Global Opportunities will hardly stand out. Launched in 2007, it started reasonably well but 2008 took a real toll on its performance. While there was some recovery in 2009, it did not rebound as strongly as might have been expected given its sharp fall. So, at first glance, it doesn't look like an obvious fund to buy.

However, this is another one of those occasions where it pays to look under the bonnet. I was fortunate enough to meet up with the fund manager, Donald Robertson, a few days ago for an update and I found him in a more optimistic mood than I had expected given the tough period he has faced. The fund invests in a diverse international portfolio of specialist funds, mainly investment trusts (or "closed-ended funds"); in other words, funds traded in the same way as individual shares on a stock exchange.

Mr Robertson went into 2008 with what he felt was a relatively defensive portfolio. Yet 2008 was such an extraordinary year that his holdings in hedge funds and private equity funds, which he thought should have defensive qualities in a falling market, proved to be quite the contrary as investors scrambled to sell all kinds of assets.

To compound the problem many of the investment trusts in the portfolio began to trade at wider discounts to their net asset values, a situation that got worse at the height of the credit crunch. This meant the fall in value of the fund was exaggerated even further.

While 2009 saw markets improve the fund still lagged behind, largely because the discounts on the fund's holdings didn't really close by much. In fact if you look through the portfolio today the average discount is around 25 per cent to net asset value whereas the average for the investment trust sector as a whole is about 11.5 per cent. By buying the fund now there is an opportunity to pick up a variety of assets for a lower price than their intrinsic value.

Whilst the fund lies in the global growth sector, Mr Robertson pays no regard to this benchmark. Instead, he builds his fund by selecting holdings through fundamental analysis and reference to what he sees as important investment themes. It results in quite an unusual portfolio, which presently has approximately 18 per cent in resources, 5 per cent in financials and almost 30 per cent in emerging markets. The fund's heavy position in resources is because SVM believe commodities are an important long-term growth story. This reduced the supply of key commodities as many projects were mothballed just at a time when further supply was expected to come through.

Interestingly, one of the biggest holdings is China Real Estate Opportunities, an investment in commercial property. It is on a massive discount of around 50 per cent but Mr Robertson expects this to change dramatically when the fund becomes listed in Singapore where he believes there are more buyers for this type of fund.

Another holding is BP Marsh, a private equity fund in the process of winding down. Once again this looks like a particularly undervalued situation. Indeed, SVM Global Opportunities is full of such undervalued holdings, which will gradually release their true value over the next year or so and provide good returns for investors.

Mr Robertson feels he has a portfolio of holdings that should at least preserve their value because they are unlikely to be shunned to any greater extent by the market. At the same time he sees a lot of potential upside among many of the holdings, an optimism which also stems from a reserve list of at least 30 other opportunities to add to the portfolio in due course. This is far higher than normal and indicative of the number of anomalies that remain after the market turbulence of the last couple of years. This fund is aptly named as it is just the type of investment to exploit these widespread opportunities.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Travel
travel
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
Morrissey pictured in 2013
people
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
people
News
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
tech
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Support Technician / Application Support

    £20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

    Team Secretary - (Client Development/Sales Team) - Wimbledon

    £28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

    Accountant / Assistant Management Accountant

    Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    Day In a Page

    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star