One theme I return to time and time again in my column is the quality of fund managers. Whilst there are thousands of funds available to investors, I'm afraid many are average, and simply make up the numbers.
I have little interest in football but the following analogy works quite well. There are many football players and clubs, but very few players of star quality that regularly make a difference to their team's performance. The clubs that can attract these top players tend to win the silverware year after year. Similarly, when investing, I want to fill my portfolio with star-quality names to stand the best chance of making money.
One such manager is Crispin Odey who runs the INSYNERGY Odey fund. INSYNERGY was founded a year ago with the aim of sourcing proven managers from outside the traditional retail market and making them available to the general public. Mr Odey's reputation for running successful hedge funds was well known in the industry but, until then, it was difficult for private investors to access to his expertise.
INSYNERGY Odey is classified as a global growth fund. However, not all global growth funds are built in the same way and you need to look under the bonnet to discover its true nature. For example, it is unusual to see some 34 per cent in the UK and 21 per cent in Germany. There is also a large cash position of 11 per cent, which at first seems at odds with his current bullish views. However, he often uses cash as a balance against some of his more aggressive positions, and it allows him to quickly react to any short-term opportunities that arise.
In keeping with his hedge fund background Mr Odey runs the fund with an absolute return philosophy, meaning that whilst he wants to make money for his investors, he is also conscious not to lose it. To achieve this he is able to hold substantial quantities of cash should his view of the market become more cautious. He takes no notice of any benchmark or index and he blends his overall views of the economic world with a stock selection process based on company fundamentals.
Most importantly, Mr Odey has a knack of being ahead of the curve, which has been amply demonstrated by events of the last couple of years. He shorted banks in his hedge fund way before their problems became widely accepted during the credit crunch. One client told me that shorting was an "abomination", but I believe it serves a purpose as well as being a perfectly valid investment strategy. The shorting of banks could be said to have been an early warning system highlighting that all was not well with the financial system. Mr Odey was subsequently one of the first managers that picked up Barclays shares close to the bottom and it remains his largest holding in the fund today.
So what are Mr Odey's views at the moment? He believes equities are very cheap in relation to bonds and that we are in the middle of a substantial rally in the equity market. Furthermore he is convinced the rally will continue whilst it is effectively supported by government policy in the UK and overseas.
The enormous injection of money (equivalent in his view to 19 per cent of GDP) and the slashing of interest rates have forced money into other assets. Whilst it is tempting to be cautious given the extent of the rally, his advice is that selling now would be a mistake and that investors should continue to hold their nerve until markets reach an inflexion point. He makes an interesting point that managing money in bull markets is as difficult as, if not harder than in bear markets simply because commentators are constantly testing your convictions with bearish views.
Mr Odey's advice is to hang on for the time being. When to sell is a more difficult decision, but if I was you I would buy the fund and leave this to Mr Odey.
Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independentReuse content