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Food for thought as Insight goes short

Insight’s multi-manager team has increased its short position on US smaller companies in its diversified target return fund through the ProShares ultra-short Russell 2000 exchange traded fund.

The ETF provides twice the inverse of the daily performance of the index. This means that unlike conventional ETFs, it will make money if the index falls and lose money if the index rises.

Insight has a negative view on US small caps, which it regards as expensive. Smaller companies have a greater dependence on the US consumer for their revenue, it says, unlike bigger companies that are typically more affected by global factors. Given the problems in the US sub-prime mortgage sector, the belief is that consumer spending will fall, which will hit small companies hardest.

Insight is also continuing with the agriculture theme in the diversified target return fund through the DWS global agribusiness fund. The fund invests across all parts of the food chain, from production to consumption, through listed companies around the world. Companies in the portfolio are involved in different types of agricultural business, from land and plantations to food products and biofuels.

Insight co-head, multi-manager Patrick Armstrong says: “We think that the demand side is strong from India and China, where there is an emerging middle class. Agriculture has lagged beh-ind other commodities and the only way that agricultural commodity prices will not rise is if intensive farming meets the demand. However, if that happens, the equities will give us a bit of a hedge because they will benefit.”

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