Bottom-up fundamental research enables the team to uncover some of the most attractive global investment opportunities. Ultimately, we invest in companies that have quality assets, a management team with a proven track record and a strong ability to execute business strategies. We invest not only in large and mid-cap companies but also in early-stage, small-cap stocks as these tend to offer better growth characteristics. While the portfolio weighting is typically one-third large cap, one-third mid cap and one-third small cap, this varies and is actively managed to reflect current and expected future market conditions. Because earlier stage companies tend to have lower liquidity, portfolio position sizes for such stocks are typically less than 1%.
The team takes an actively managed long-term approach investing across commodities, sectors and market capitalisations, which helps provide the fund with downside protection in downward trending markets while at the same time enabling us to participate in up markets.
Risk management is a key part of the process. The fund is well diversified, which is achieved through the number of holdings, the geographical location of assets, holdings spread across market capitalisations and the number of commodities represented.
The fund caps its holdings at 10% of the portfolio, although the largest holdings are typically at 5%. Concentration is also fairly low and, as a rule, the top 10 holdings represent 30-40% of the fund’s value.
Wealth manager viewpoint
McDermott:
I should start with saying that I invest in both of these funds so it won’t surprise you that I think there is space for both in a portfolio. I’ve been saving monthly in them for a number of years, and sometimes it’s been painful because the asset class has been out of favour.
The Investec fund had a change of manager last year, however George Cheveley and his co-manager have a lot of experience in the sector, so I’ve stuck with it. It tends to invest in the larger gold miners but is reasonably diversified in terms of location.
The Smith & Williamson fund is a bit different. It invests in mid and small-caps and is very heavily weighted to Canada. It is still a very small fund and therefore very flexible and Ani Markova is a very consistent manager.
Despite the bounce year to date (both funds are up about 130%), I think it’s worth having both in the portfolio. They act as a decent diversifier and, if you believe that gold shares have further to go to close the gap on the spot price, more money can be made.
