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

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