Not everyone is running for cover after the recent bout of volatility in global capital markets. One such is Simon Edelsten, the manager of the Artemis Global Select fund. In fact, he is rather sanguine regarding the outlook for many emerging markets and even quite positive in his medium -term views on China and Japan. Nevertheless, at last count the bulk of his fund´s holdings were invested in US securities.
The Oxford-educated Edelsten´s investment style is a mix between looking for long-term macroeconomic themes coupled with a fundamental value approach to screening for stocks.
Looked at in another manner, and in his own words, it's a matter of not relying on central banks moving interest rates in the way you hope, but rather of looking for investments with a stable long-term tailwind.
His fund has returned 32.7% since its launch in the middle of 2011, versus 26.9% for the benchmark MSCI AC World GBP. For a man who jokingly defines himself as a "natural coward" when it comes to investing his client´s monies that would seem to be quite a good result.
Perhaps worth keeping in mind for anyone who invests in equities in general, Edelsten pointed out to Sharecast how history shows that you want to take less risk as markets rise,"rather than getting carried away with the rising tide of confidence which usually tends to occur in recoveries."
Precisely in this regard, his fund, he argues, is managed in such a fashion that it should tend less than the benchmark in bear markets.
An example of how he does this is by searching for relatively safe ways to Invest in his main themes. Thus, when trying to tap into the emergence of the consumer base in emerging markets the Global Select Fund´s team - which also includes Alex Illingworth and Rosanna Burcheri - opts to invest in the European-listed shares
of Nestle instead of those of its listed subsidiary in Nigeria, for example. The former trades at a price-to-earnings multiple [P/E ratio] of 17 versus about 35 times earnings for the latter.
As a matter-of-fact, the Artemis team´s view is that many emerging market indices are actually quite expensive at the moment - despite some market commentary to the contrary - if one takes into account the fact that their benchmarks are dominated by very large banks and petrochemical firms with low P/E´s. This tends to lower and distort the aggregate figures for that financial ratio, in their view.
On the subject of the recent turbulence in the Indian rupee, the less worrying thing is that it is quite a closed economy; unlike China, India can have problems without it necessarily derailing global growth.
Also worth pointing out, especially in these times when one can often hear talk of the inevitable decline of the City as one of the world's main financial centres, he is quite puzzled by that line of reasoning, pointing out with a smile that he has heard that many, many times during his career.
Above all, as he explained to us, London has the necessary and hard-to-reproduce critical mass of human talent, to which one must add how cosmopolitan it is in general.
Hence, he feels confident enough to invest in outfits such as Land Securities. Such companies - which he points out yields 3.5% and trades at a 10% discount to its assets -, are the kind which investors switching out of bonds ought to prefer. No surprise then that the Global Select Fund last week purchased stock in that company.
Amongst the major investment themes which his team is following are: "grey dollars," as the emergence of the post-"baby boom" generation Stateside is referred to ; the emergence of a consumer base in emerging markets; the energy glut in the context of the US shale revolution and "new media."
The first of those is why he had 41.7% of his positions in US assets as of July 31st 2013. "And not to take advantage of a possible appreciation in the US dollar?," Sharecast inquired. No, but he is happy to benefit from it, was his answer.
Lastly, before we began recording the interview, in a brief discussion about the UK economy this top-ranked manager pointed out to me how recoveries in the British economy tend to be led by consumer spending. Recent data has been encouraging, as has rising house prices and improving business confidence.
However, spending by the young may struggle to fuel a multi-year recovery as students leave college indebted, set up home later and have less security than in previous cycles. However, for now shares remain a more attractive asset class than bonds or cash for UK investors.