Edwards says both his balanced growth fund and Alan Borrows’ balanced income fund will benefit even in relatively flat markets as many assets in the funds, such as property, investment trusts and hedge funds, are trading well below their net asset value.
Balanced growth and balanced income are both fourth quartile in their Investment Management Association sectors over the past 12 months, having lost 31.8 and 29.3 per cent respectively at February 9, 2009.
Edward says: “There has been a severe dislocation, more so probably in property than in any other area between the underlying value of the bricks and mortar that are held under these vehicles and the way that those vehicles are priced.
“We are working very closely with the managers of these vehicles to realise that value as we move forward. We are continuing to make use of structured products and there is significant value in this part of the portfolio, especially given the reduced level of counterparty risk and the scope for volatility to fall further.”
Edwards also says asset correlation is set to slow down in terms of returns over the next 18 months and claims that individual markets will start to reassert themselves.
He says: “We are confident of the positions we have got in the funds, very confident. The strength of the blue-chip holdings that we have been concentrating on, the quality and spread of our corporate bond positions, the real worth of our underlying property investments and some of our closed-ended investments and, frankly, the prices of those vehicles looks very attractive at the moment. Also, there will be a snapback in terms of prices and NAVs that we have talked about.”