Mark Dampier: Missed targets at Artemis, but fund will still come good
Saturday 04 August 2012
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
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Weekly Money: Round-up of the personal finance stories you may have missed 19-23 January
Bargain Hunter: From The Outsider to 1984, catch a cut-price classic, read it in the rye
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Money Insider: Smart alternatives to the pensioner bond
- 1 Rowan Atkinson to sell £10 million McLaren 'supercar' he crashed into a tree and a lamppost
- 2 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 3 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 4 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 5 Men behaving badly: Urinating while standing, 'manspreading' and the gendering of selfishness
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village