F&C Investment Trust manager Jeremy Tigue says he has been increasing borrowings in the trust to scoop up cheap shares during the credit crunch.
Tigue says the recent market turmoil has opened up some opportunities for long-term investors.
The 2.6bn investment trust’s gearing has increased from 5 per cent in June to 8 per cent in August and Tigue is expecting to get around 10 per cent this month.
He says: “Our caution earlier in the summer clearly paid off. We slashed gearing to a seven-year low and closed out our long-standing and successful strategy of borrowing in Japanese yen to finance higher returning investments elsewhere. The shake-out in markets is throwing up real opportunities for long-term investors and therefore it is right to progressively add new positions to the portfolio.”
F&C investment trust is borrowing in US dollars rather than Japanese yen, based on Tigue’s assessment that the US Federal Reserve will reduce interest rates to address the problems in the credit markets which stem from defaults on US mortgages.
Tigue favours emerging markets for the long term and remains cautious about the US. He warns private investors not to “pile in relentlessly” but to consider a similar steady approach to re-entering the market, for example, through regular savings schemes.
He says: “Despite widespread bearishness and paralysis in credit markets, the liquidity crunch will unwind over the coming months.”