After what he describes as a dismal 2008, Rathbones James Thomson sees light at the end of the tunnel. The performance of his 60m Global Opportunities fund has improved markedly after a tough year, and now ranks 57th in the Investment Management Association (IMA) Global Growth sector.
Over the year to May 18, the fund fell 28.6% against a sector average fall of 20.1%, according to Morningstar. But over three months it has delivered a positive return of 15.9% against the sector average of 9.3%, placing it in 13th place in the peer group.
Thomson attributes the funds difficulties in the second half of last year to its exposure to economically sensitive growth companies, commodities and small and mid caps. However, he says these areas are now starting to outperform.
In the second half of 2008, Thomson had a large cash position as he felt there was a dearth of attractive opportunities in his investable universe. His cash weighting peaked at 37%, but Thomson is now putting these assets back into the market and currently has 12% in cash.
He is looking to reduce this weighting further by adding to the 43 holdings in the portfolio, which typically contains between 50 and 60 stocks.
One stock that has been a success for the fund is Aggreko, a firm that manufactures and rents out power generators. Thomson says its international power projects have helped the firm to grow by 50% this year, and it is trading on a price/earnings ratio of 13, which the manager says is a reasonable valuation.
A holding that has been detrimental to performance is Foster Wheeler, an engineering firm. Thomson says the stock fell more than 50% as the oil price fluctuated. One big theme last year was energy infrastructure, but I was too heavily exposed to it it was 30% of the portfolio at one time, which was too much, he says.
Thomson says he is seeing signs of increasing risk appetite among fund managers. Fund managers are moving out of defensives into more sensitive areas that will benefit from any green shoots of economic recovery. People are embracing risk.
He anticipates a possible recovery in the global economy in 2010 and in the markets this year, but emphasises it will not be a smooth ride. This year will see a spiky recovery in stockmarkets it wont be a simple sloping line upwards. We have seen the bottom in terms of stockmarkets and maybe the economic bottom by the end of this year, he says.