Hawksmoor Investment Management’s Richard Scott and Daniel Lockyer have attributed the first year’s performance of their Vanbrugh fund to asset allocation decisions.
The fund is second out of 144 funds in the IMA cautious managed sector in its first first year, at February 18. It returned 41.5 per cent compared with the sector average of 19.5 per cent.
Former Iimia multi-managers Lockyer and Scott take a pragmatic approach to portfolio construction, looking at whether open or closed-ended funds provide the best way to access particular asset classes or managers.
Scott says, at launch in February 2009, many fund managers were boasting about how much cash they were holding while other assets were cheap and plentiful.
He and Lockyer focused on high quality assets where the downside was limited. They benefited from exposure to corporate bond funds when spreads relative to government bonds were at levels not seen since the 1930s. Investment trusts that were trading on very wide discounts to their net asset values, which have since narrowed, have also made positive contributions to performance.
Scott says: “For example, we invested in a commodities trust trading at a 30 per cent discount, which meant a pound of assets cost 70p. When the recovery came, the net asset value sharpened and the discount narrowed as well. Those types of extreme valuations are not around any more but it enabled the Vanbrugh fund to get off to a flying start.”
Scott says co-managing the fund with Lockyer has also helped. “It improves the quality of the decision-making, as we both have to be convinced about something before we hold it.”