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Thames River steering clear of the bounce

Thames River Capital’s multi-manager team has chosen not to chase the bounce in the cyclical and financial sectors as it does not believe their outperformance will be sustained.

Managers Gary Potter and Robert Burdett knew a bounce could occur in the second quarter of the year but they steered clear of the highs and kept faith with managers that have served them well in the last 12 months.

The short-term performance figures of Thames River’s equity managed and balanced managed funds have dipped relative to their sector averages because they did not participate in the cyclical and financial rallies. But the multi-managers say there will be quarters where their funds lag because they do not chase short-term trends that may turn out to be fads.

Potter says some managers have captured the growth from the recent market bounce but their one-year performance figures are disappointing. He thinks it would be surprising if the sectors that bounced between March and June will be top of the pile in the next three months.

Potter says: “If you look at the one- year numbers up to June 30, all five of our funds are top-quartile. We have not chased what has bounced the hardest, which in June has been the stuff that has been the most downtrodden. We probably should have done a bit more but it would not have made much difference to the performance of our funds.

“I believe the high-street banking sector is fraught with problems and we have seen a bit of mean reversion but it would be foolhardy to chase it now. It is about sticking with quality and what is important is how the markets develop. From here, the playing field is open again.”

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