Artemis Strategic Assets - a little bit of everything

Richard Troue | Wed 18 April 2018

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• The managers are positive on UK shares, but negative on the US stock market
• They retain a long-held negative view of European and Japanese government bonds
• Performance has lagged a strong stock market in recent years

Our View

We still think this fund can have a place in a well-diversified portfolio. It’s invested very differently to many other funds. While it has typically lagged a strongly rising stock market since launch it has on occasion offered some shelter during relatively brief periods when markets have fallen.

If we endure a prolonged downturn, and particularly if we enter a tougher environment for government bonds, the fund has the potential to offer some shelter, and even positive returns, although there are no guarantees. We remain happy to include it on the Wealth 150.

Past performance is not a guide to the future. Source: Lipper IM to 31/03/2018.

Managers' view - shares

Buying UK companies, shorting US stocks

Brexit is on the horizon and it’s put many investors off the UK. This has piqued the interest of William Littlewood and Kartik Kumar. As contrarian investors they often look to go against the herd, or invest in out of favour areas.

Almost 45% of the fund is invested in shares and the UK makes up nearly 70% of this. They’re particularly positive on banks, including Lloyds, Barclays, and Virgin Money. They’ve lagged peers in the US, but there could be scope for this gap to close, in the managers’ view, as the UK embarks on a path of interest rate rises that could increase the profits banks make on the money they lend.

The managers have a number of ‘short’ positions on US companies, where they feel high share prices are out of kilter with company prospects. Short positions rise in value when share prices fall, but the opposite happens if prices continue to rise.

The managers also have the flexibility to invest in smaller companies and emerging markets, which are higher risk.

Managers' view - bonds

We are still extremely negative on the future for bonds in Europe and Japan

WILLIAM LITTLEWOOD AND KARTIK KUMAR

This view is expressed though significant short positions in European and Japanese government bonds. The short position in Japan accounts for nearly 60% of the fund. France and the UK make up a further 14% each, and Italian government bonds are an 11% short position. The use of derivatives to make these investments is a higher risk approach, and the managers also have the flexibility to invest in higher-risk high-yield bonds.

The managers believe at some point European and Japanese government bonds will see a reversal in fortune and their yields will rise, meaning prices fall. As they have no foresight as to when this might happen they are happy to maintain their short positons, even if it means negative performance while they wait for a turnaround.

Managers' view - currencies

Long-held reservations over the euro and yen.

The managers believe a combination of chronic debt, money printing, aging populations and, specifically in the case of Europe, over-regulation, will be negative for the euro and yen. The fund is positioned to benefit from falls in the value of these currencies.

They are more positive on the currencies of countries in better financial shape, with better growth prospects, or less burdened by regulation. These include the Swedish Krona, Singapore Dollar and US Dollar.

Managers' view - commodities

A bias to gold

Almost 16% of the fund is invested in commodities, with around 10% in gold, 4% in platinum and 2% in silver. Commodities, particularly gold, can provide a store of wealth in uncertain times and perform well if shares go through a tough patch.

Please read the Key Features/ Key Investor Information in addition to the information above.

Find out more about this fund including how to invest