Markets continue to be extremely volatile in June as they have been for much of the year. This is understandable as the general optimism of early 2007 gave way to extreme pessimism. As an analogy, market sentiment is akin to a pendulum. When it starts to swing, it is unlikely to stop in the middle, rather swing to the other extreme. Reality is much less pronounced. Undoubtedly, the investment climate has changed but not as much as market commentators or indeed the markets would indicate.
Economic and corporate news is concerning but known and the markets should have discounted much of this already. In fact, markets appear to be assuming that there will be a protracted recession globally. As commented on previously, we believe that this is unlikely. Of the mature markets, the US having originated many of the problems appears to be aggressively addressing them. Of much more concern is the UK where the conditions look much worse. Happily, the Fund is underweight in the UK. With global interest rates at historic lows, it is unsurprising that inflation is rearing its head as a principal concern. However, we believe that comparisons with the 70s or indeed the early 90s are overly pessimistic.
June was another quiet month with few transactions. The holding in US hedge fund Laurus was switched into the more liquid UK listed version.
SVM Global Fund’s portfolio is structured into five broad themes. Specialist investments include those exposed to specific industries or areas such as Eastern Europe or emerging markets.
Property exposure is concentrated in emerging Europe and the less mature areas of developed Europe. Hedge funds represent exposure less dependent on stockmarket direction.
Funds with investments in resources cover a broad range of commodities both in exploration and production. Private equity exposure is targeted towards those funds in the realisation phase of the private equity cycle.