Gore Browne has sizeable exposure to closed-ended funds in its client portfolios, including 3i Infrastructure (on a premium of 14.26%) and International Pubic Partnership (12.68%).
It also holds the likes of Assura, MedicX, Empiric Student Property and GCP Student Living.
He says: “Sadly for our clients we were out of long fixed income exposure, like most people, a long time ago as most of our fixed income exposure has been in long/short strategies. We have often replaced that stable income generation with infrastructure and less volatile property plays.”
Despite the pricing, James is not committed to say that infrastructure funds are expensive: “It depends how you judge it. If you look at the premiums to NAV then clearly you could say they are expensive. But then if you look at the calculation of the NAV relative to the pricing of secondary deals, then maybe they are not.”
James is also yet to be convinced that enough fiscal spending programmes will come through to be a tailwind for the sector, as some have suggested.
He adds: “My longer-term thoughts are that QE had absolutely nothing to do with stimulating economic growth, but had everything to do with firstly avoiding deflation, and secondly allowing the banks to rebuild capital.
“I think that financial repression through QE and accounting rules for pension schemes, and Solvency II rules will be with us for quite a long time.”
Gore Browne also uses some investment trusts for equity exposure, including Scottish Mortgage and Worldwide Healthcare.
James adds: “We want to own companies with strong balance sheets and excess cash flow generation. Yes, they look expensive on a normal measurements but that’s not necessarily true at a cashflow per share level.
“In a period of financial repression where we are expecting very low growth you must back managers who look to support disruptive growers.”
