Last year Momentum Global Investment Management bought Seneca Investment Managers and this year rebranded some of their funds including their value-focused investment trust. Giving the topsy turvy markets we’ve experienced in the last year and a half how is the firm positioned for growth?
Andrew Hardy (pictured), the firm’s investment director, spoke to Fundeye and explained the importance of a multi-asset approach and ‘not betting the farm on any one [asset class]’. Naturally given the changing market dynamics of last year compared to 2021, some of these asset classes do not feature as prominently in Momentum’s portfolios as they did during the height of the pandemic.
Regarding convertible bonds, Mr Hardy said they are “a really attractive asset class for many reasons. It gives you a defensive exposure to growth equities”.
However, given the onset of inflation the firm has trimmed back exposure to what was, according to Mr Hardy, the best performing asset class on a risk adjusted basis last year, outperforming global equities by 10 percent.
The firm also favour real assets which are a natural hedge against inflation, with retail warehousing trust Edison Property being held by both Momentum and its acquisition Seneca. Mr Hardy likes the closed-ended fund due its 7 percent yield while it still trades on a 20 percent discount to NAV. However, regarding the wider property sector he sounds a note of caution.
“it's effectively a stock pickers market [property] going forward. There's a lot of room to add value by careful selection but also room to protect capital,” he said.
He added that the office sector doesn’t look overly attractive as with fewer people in the office firms will be looking to downsize in a bid to save money.
In the fixed income space, Mr Hardy holds some emerging market debt in hard currency, which should provide a decent yield without the currency risk that local currency bonds bring. That said, some of the firm’s funds are exposed to emerging market currencies as they hold equities, although given Momentum operates a multi-specialist, multi-manager approach, investors can rest assure that their assets are being handled by experts in a particular field.
One area which Fundeye covered recently and is also on Mr Hardy’s radar is Chinese sovereign debt which he views as a fairly safe way to ‘diversify your diversifiers’. Despite having less than 5 percent foreign ownership, the 10 year sovereign bonds have a decent yield of 3 percent, certainly higher than any govies in the developed world.
Essentially Mr Hardy is an optimist and while there may be greater volatility on the horizon this should largely be welcomed for long term minded investors, all the more if one can consider as broad a range of asset classes and investments as possible. By expanding the investable universe like that means investors are more likely to find areas of mispricing whilst also increasing the scope to build out robust portfolio diversification he said as a summary.