BRIAN O'Neill has been running the Gartmore Global Trust since 1981, but believes the current situation is as dire as he has experienced.
"This is pretty bad in terms of severity and while the 1987 crash happened in a couple of days, this is more of a slow-burner," said O'Neill. "I don't think the world has come to an end, but it feels like it."
The problem is exacerbated by a shor
tage of opportunities in the markets. "There are only relative hiding places for the time being and with inflation rising, I don't think that will reverse shortly. Stagflation is the worst thing for markets and that's what we appear to be in."
The trust, which aims for long-term capital growth through investing in a concentrated portfolio of international equities, is one of the most consistent global growth trusts. Its share price has outperformed the global growth sector over five, three and one years, ranking fifth of 36 trusts over each of the latter two periods. It is currently trading at a 7 per cent discount to net asset value – the sector average is 8.5 per cent – and has assets under management of £139 million.
O'Neill doesn't allocate by region, but by picking the best sectors and taking the best ideas from within those confines. Aside from financials, the trust's main weightings are in oil and gas, consumer goods and basic materials. It is overweight in tobacco, a defensive, non-cyclical play, with British American Tobacco the second biggest holding in the portfolio behind Australian coal firm Felix Resources.
O'Neill has reduced the trust's exposure to financials, although they still account for 18 per cent of the trust's holdings. "It would be nice to say we have no financials, but they're still 20 per cent of our benchmark. If you were running a restriction-free fund and were not concerned with dividends, you might have no financials in there."
Some opportunities will present themselves in financials further down the line, according to O'Neill, because although more rights issues are expected in the sector in the short term, some takeovers are also likely.
In terms of regional exposure, the trust's aims to split its holdings into 50 per cent UK and 50 per cent global. Currently the trust is underweight in the UK, however, at 36 per cent.
"We probably can't go much more underweight in the UK, but things here aren't much worse than they are elsewhere," said O'Neill.
He pointed out that while the FTSE is down 20 per cent in the year to date, indices including those in Hong Kong, Germany and Switzerland have fallen further.
The annual management charge is 0.6 per cent and the trust is available as an individual savings account and as a regular savings plan.
The full article contains 472 words and appears in The Scotsman newspaper.
