Mark Dampier: Missed targets at Artemis, but fund will still come good

The Analyst

During the 1990s, William Littlewood ran one of the most successful funds in the UK, Jupiter Income, before stepping back from fund management for a few years. His eagerly awaited return was at Artemis, where he was given the freedom of a fund investing in wide range of assets. He is famed for his shrewd macro-economic views, and Artemis Strategic Assets was a vehicle designed to fully harness his talents.

The fund launched in May 2009, and it seems an appropriate time to review the fund, as its objective is to beat both the FTSE All Share index and cash over rolling three-year periods. Any such twin aim is difficult for a fund manager. Enough risk needs to be taken to keep up with the market, but capital also needs to be protected in the event of falls in order to outperform cash. It means owning the right asset classes at the right times – a tough task for any investor.

Unfortunately, over its first three years, the fund, while beating inflation, has not outpaced the All Share index. Looking at the make-up of the fund, it should not come as a huge surprise. Having a wide range of assets encompassing commodities and currencies has somewhat diluted the strong performance of the fund's equity holdings. In addition, Mr Littlewood can "short" assets he believes will fall in value, aiming to profit from any decline in price. This ability could be an advantage, like any other technique, if the manager gets it right. But his decision to short government bonds including UK gilts and US treasuries has been a mistake: Since launch, the strategy has cost the fund around 13 per cent of its value.

The day the fund was launched I argued with Mr Littlewood that I saw no need to short government bonds, at least for the time being. While I had sympathy for his reasons (that bond yields were far too low given persistent inflation), I felt the amount of forced buying, especially in the UK from the Bank of England, pension funds and banks, was likely to keep gilts yields moving down. In a recent telephone conversation with Mr Littlewood, I found him more entrenched in this view than ever, not surprising given 10-year gilts are yielding just 1.5 per cent. The upside is now clearly limited. His view is that when the sovereign debt collapse comes, which he is convinced it will, it will happen so quickly that unless you have the trade already on, you will miss it.

Mr Littlewood has undoubtedly become more bearish this year, gradually reducing equity positions during periods of strength. Having built up 27 per cent in cash, he is also shorting the euro, feeling it is only a matter of time before matters in Europe escalate. At the same time, he is adding to his holding of Swiss francs as he believes the currency's peg to the euro will eventually break. He is also keen on gold, and keener still on platinum whose price per ounce is trading below that of gold - an unusual occurrence.

Platinum usually trades at a premium, and has been as high as 25% above the gold price. The reasoning behind these precious metal positions, as well as his bearishness on bonds, is his belief that the only way out of the debt problem in Western economies is inflation, an environment that should favour 'hard' assets.

Despite a mixed start for this fund in its inaugural years, Mr Littlewood remains one of my favourite managers. Strictly speaking, three years is a very short time period to judge a fund, and outstanding success earlier in his career provides evidence of his skills.

It has also been a period that has wrong-footed many good-quality managers, in part because the unpredictable actions of politicians have exerted significant influence over markets. However, markets are too big to control in the long term. There will come a time to be short government bond markets and I suspect this fund will be a good one to hold at that time.

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 www.h.l.co.uk/independent

Compare with the Independent: See how much you could save by switching credit cards. Compare now

VIDEO
Life & Style
Father and son: Michael Williams with son Edmund
lifeAs his son’s bar mitzvah approaches, CofE-raised Michael Williams describes the unexpected joys he’s experienced in learning about his family’s other faith
Arts & Entertainment
Ian Anderson, the leader of British rock band Jethro Tull, (right) and British guitar player Martin Barre (left) perform on stage
musicJethro Tull frontman leads ‘prog rock’ revival
Sport
Gareth Bale dribbled from inside his own half and finished calmly late in the final to hand Real a 2-1 win at the Mestalla in Valencia
sport
Arts & Entertainment
Who laughs lass: Jenny Collier on stage
comedy... writes Jenny Collier, the comedian whose recent show was cancelled because there were 'too many women' on the bill
News
House proud: keeping up with the Joneses now extends to children's playhouses
newsLuxury playhouses now on the market for as much as £800
News
news
Life & Style
Stir it up: the writer gets a lichen masterclass from executive chef Vivek Singh of the Cinnamon restaurants
food + drinkLichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines
Extras
indybest
Arts & Entertainment
Ken Loach (left) and Mike Leigh who will be going head to head for one of cinema's most coveted prizes at this year's Cannes Film Festival
filmKen Loach and Mike Leigh to fight it out for the Palme d'Or
News
The academic, Annamaria Testa, has set out on her website a list of 300 English words that she says Italians ought to stop using
newsAcademic speaks out against 'Italianglo' - the use of English words in Italian language
Life & Style
tech
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Helpdesk Engineer Apprentice

    £150.00 per week: QA Apprenticeships: This company has been providing on site ...

    Telesales & Sales Support Apprentice

    £221.25 per week: QA Apprenticeships: This company is a well established Inter...

    Client Relationship Manager - SQL, Python

    £40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

    **Financial Services Tax**

    £35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

    Day In a Page

    How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

    How I brokered a peace deal with Robert Mugabe

    Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
    Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

    British Muslims's Happy video attacked as 'sinful'

    The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
    Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

    Michael Williams: Do as I do, not as I pray

    Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
    A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

    A History of the First World War in 100 moments

    A visit to the Front Line by the Prime Minister's wife
    Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

    Jenny Collier: 'Sexism on stand-up circuit should be extinct'

    The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
    Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

    Cannes Film Festival

    Ken Loach and Mike Leigh to fight it out for the Palme d'Or
    The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

    The concept album makes surprise top ten return

    Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
    Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

    Lichen is surprise new ingredient on fine-dining menus

    Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
    10 best baking books

    10 best baking books

    Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
    Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

    Ricky Gervais: 'People are waiting for me to fail'

    As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
    Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

    Mad Men returns for a final fling

    The suits are still sharp, but Don Draper has lost his edge
    Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

    Google finds a lift into space will never get off the ground

    Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
    Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

    Is sexual harassment a fact of gay life?

    Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
    Moshi Monster creator Michael Acton Smith: The man behind a British success story

    Moshi Monster creator Michael Acton Smith

    Acton Smith launched a world of virtual creatures who took the real world by storm
    Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

    Our journalist tries out Kim Jong-un's haircut

    The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers