|
|
Marriott First World Equity Fund - News
|
|
|
|
|
Marriott First World Equity comment - Sep 11
|
|
Thursday, 22 December 2011
|
Fund Manager Comment
|
The third quarter of 2011 represented one of the most difficult quarters in financial markets since the collapse of Lehman Brothers marked the emotional low point of the banking crisis in 2008. In some ways, these latest falls were worse, coming as they did at a time when markets were starting to show modest signs of recovery. In the event, the massive structural issues facing Greece and the lack of firm leadership by the European authorities precipitated a flight to safety to US and UK government bonds, despite the low interest yields on offer and the prospect of guaranteed negative real returns. The majority of equities in our First World Equity Fund have exceptionally strong balance sheets and remain long term safe havens because of the defensive nature of their earnings, their liquidity and their high dividend yield. They, however, have been subject to high levels of volatility. Liquidity is generally considered to be a strong attribute of any security but in times of crisis it can be a hindrance as hedge funds and large programme traders sell their most liquid assets to meet margin calls, irrespective of the fundamentals. Certain sectors have been avoided. For example, we continue to avoid bank stocks as over-regulation and, in many instances government ownership, will subdue earnings for some years to come. Whilst Europe's problems have been reflected in the dire falls in their equity markets over the quarter, America at least is showing a little more resilience. The latest US GDP numbers show a modest improvement in this economy although the fragility of this recovery will not be helped by the recent surge in the Dollar. Whether committing fresh capital to equity markets or reinvesting income, it is important to remember that the most attractive buying opportunities often occur in an asset class when the majority of investors are fearful, become forced sellers or have just given up. Recent acquisitions by a number of major quoted companies show that they see excellent value in the stock market. United Technologies, for example, paid a near 40% premium to the market price to acquire aircraft components manufacturer Goodrich whilst Hewlett Packard paid a similar premium for the UK software company Autonomy. A surprising number of deals of this nature are currently taking place whilst the number of new issues has all but dried up. For investors who are prepared to be patient, equity market falls of this magnitude represent an opportunity rather than a threat and we are selectively adding to holdings on those on weaker days of the market.
|
| |
|
Marriott First World Equity comment - Jun 11
|
|
Thursday, 8 September 2011
|
Fund Manager Comment
|
Market sentiment in the second quarter of 2011 was dominated by Europe and, in particular, the threat posed by a Greek default. After weeks of procrastinating, the European Union and the International Monetary Fund eventually agreed to bail out Greece after the Greek parliament had agreed to implement an austerity package designed to reduce their crippling level of debt.
Ironically, Greece's problems saw the Euro rally during the quarter, by 2.2% against sterling and by 2.4% against the Dollar perhaps as a result of the expectation that Greece was likely to be expelled from the eurozone and that the Euro would be much stronger as a consequence. A more likely view, is the possibility of a Euro style Brady bond package of the type used to bail out a number of emerging markets in the late 1980s. (Brady bonds were issued as special bonds backed by the US Treasury and allowed the countries concerned to restructure their finances without defaulting). A Euro version would throw a lifeline to many of the banks currently exposed to the Greek crisis and also provide a solution to the problems faced by other fragile Eurozone members such as Ireland and Portugal. It would, however, require decisive action by the EU and the IMF. Elsewhere, equity market returns have been driven as much by currency movements as by genuinely improving fundamentals. In sterling and dollar terms, global equities gained just 0.4% over the quarter after a promising start derailed by the Euro crisis. Bond investors fared better. Sterling bonds rallied by 2.6% and Dollar bonds by 2.5% as investors decided that interest rates were likely to remain lower for longer. Certainly, there was little rush to buy equities although with inflation still significantly above trend, government bond (and cash) investors appear to be resigned to accepting negative real returns. Equity valuations in general are fair, but the dividend yields of securities in the Marriott portfolios are attractive.
In our view, higher yielding equities in carefully selected blue chip names represent the most sensible way to combat inflation at present. We expect this theme to gather momentum over the rest of the year, as investors focus their equity selections on well known names in their domestic markets, particularly those paying a good dividend yield. We expect interest rates to remain lower in the UK, Europe and the US for far longer than is generally being recognised. Central banks may use any softening in inflation data as an excuse for this strategy but the reality is that benign neglect of their domestic currencies and any subsequent devaluation is a relatively easy and painless way of improving current account deficits, helping exports and therefore lowering unemployment, something the Obama administration will be desperate to achieve before the 2012 election campaign gets underway. International equities should benefit in this environment and here, The Marriott First World Equity Fund is especially well positioned.
|
| |
|
Marriott First World Equity comment - Mar 11
|
|
Wednesday, 25 May 2011
|
Fund Manager Comment
|
Markets have endured a mixed first quarter to date with geopolitical events overshadowing a generally positive corporate outlook. The US, in particular, has continued to forge ahead, partly thanks to the second round of quantitative easing which has injected nearly $600bn into the US economy. Consumer confidence figures have rebounded, unemployment is falling, albeit slowly, and corporate earnings are supporting higher dividend payouts. The real uncertainties are being generated by massive geopolitical concerns. The moves towards democracy in Tunisia and Egypt have been overshadowed by the events in Libya where the country's president remains in office despite calls for abdication from the UN. With the Libyan crisis occurring at the same time as the ongoing power play in the Ivory Coast, the world is crying out for some strong leadership. All of this has, of course, served to drive energy prices higher. Whilst OPEC can flood the market in the short term, longer term a high oil price will undermine the fragile global economic recovery at a time when inflation is already creeping higher and interest rates can go no lower. The unfolding tragedy in Japan underlines the continued globalisation of capital markets and the threat of apparently unrelated events correlating to put pressure back on global stock markets. We commented earlier in the year that we expected market volatility to continue unabated in 2011. Until recently, we had expected the driver of such volatility to come from Europe where we still have concerns over how the peripheral nations of the Euro zone will adapt to the long period of economic adjustment which they will face as interest rates move higher. All of this means that we are, as ever, being vigilant about the need to focus on strong balance sheets and well covered cash dividends. We continue to believe that higher yielding blue chip equities remain one of the best places to invest money for total return in an increasingly uncertain market environment.
|
| |
|
Marriott First World Equity comment - Dec 10
|
|
Thursday, 24 February 2011
|
Fund Manager Comment
|
Momentum has carried through into the final quarter of 2010 encouraged by the second round of Quantitative Easing in the US. The similarities with the stock market rally in the early years of the 21st century are uncanny. Then, equities rose on the back of low interest rates and easy credit. This led to a credit bubble, the collapse of which nearly brought the global banking system to its knees. Today, the easy credit has gone but low interest rates remain and conventional monetary stimulus has been replaced by the latest round of a $600bn spending programme by the Fed in an attempt to pump prime a lacklustre US economy. This is a high risk strategy. No one knows for certain whether such stimulus will work or what the longer term consequences will be. In our view, the outcome should provide a major lift to the equity market but the consequences are likely to be a combination of higher inflation and a weaker US Dollar. This would be politically and economically desirable for the US economy whose export market will receive a boost whilst simultaneously providing support for asset classes such as equities, precious metals and property prices. It will, however, not be good for US bond markets, particularly at the longer end of the yield curve. This is not an issue with which we have to grapple for this fund, but we would otherwise remain very wary of this sector, inflation proofed issues aside. Investors looking for yield should continue to look towards quality equities to provide an alternative income stream to bond markets with built in protection against inflation. It rarely pays to 'fight the Fed' and with GDP and manufacturing data continuing to improve, we believe that this equity market rally has some way to go. The recent US mid term elections have proved to the incumbent Democrats that the voting public are interested in the economy first and foremost and we expect the Obama administration to stop at nothing to make things happen before the next presidential elections in 2012.
|
| |
|
Marriott First World Equity comment - Jun 10
|
|
Wednesday, 8 September 2010
|
Fund Manager Comment
|
After the euphoria of the post credit crunch recovery phase in 2009, markets are now refocusing on the latest crisis, this time the travails of Greece and the future of the Euro zone. Whilst Greece is the worst offender in terms of a huge budget deficit and, worse, a history of data manipulation, it is far from alone. Spain, Portugal and Italy are all on the periphery of the Euro zone and suffering from an over extended economy with few easy ways of repaying debt any time soon. Whilst a break up of the Euro zone is possible, we now believe that a more likely solution is the continued devaluation of the Euro, a trend which began in 2009 and has continued apace in 2010. Whilst this should help exports and create jobs, an estimated 60% of trade takes place within European borders so the impact of a devalued currency is diminished. The UK is in a better position in so much as it can set its own interest rates and financial strategy. This has not prevented it from also accruing a mass of debt which must eventually be rolled over or repaid. The bond markets will determine the cost of this exercise, rather than the central banks and the cost will therefore be higher than widely forecast. With a dependence on financial service sector jobs and a profligate former government, it will take years to rebuild the UK's balance sheet, as indeed it will in the US. From an investment perspective, we prefer names with a truly global reach in recession resilient industries. A focus on income also helps but with governments on the look out for easy tax pickings we continue to put an emphasis on First World companies with significant interests in developing markets.
|
| |
|
Marriott First World Equity comment - Mar 10
|
|
Thursday, 24 June 2010
|
Fund Manager Comment
|
Momentum for investing into high quality companies paying sustainable dividend yields has been growing since the start of the year. Although January was a little shaky, markets have rebounded in February and March to date. Although we expect some profit taking either side of the Easter break, corporate earnings have been strong enough to justify current valuations and if economic growth continues to accelerate the market has scope for further short term appreciation. Whilst Dollar strength has helped Sterling returns, it is worth remembering that a significant part of earnings in both the UK and European components of the portfolio are generated outside of their domestic market. The Fund benefits, therefore, from the liquidity and accounting standards of the First World with a sprinkling of emerging markets growth which is contributing nicely to the bottom line of many companies in the Fund's portfolio. As at the start of March, the Fund was fully invested.
|
| |
|
Marriott First World Equity comment - Dec 09
|
|
Tuesday, 23 March 2010
|
Fund Manager Comment
|
After a strong period of recovery in late 2009, it would be reasonable to expect some consolidation within the fund in 2010. However, those businesses which have led the market higher in recent months have often been those companies which were hardest hit by the credit crisis and whose weakened balance sheets prevent them from paying dividends which are the lifeblood of the Marriott First World Equity Fund. As a result, whilst the Fund fell in value in 2008, the falls were muted compared with large sections of the market.
Conversely, recovery was also a relatively modest affair set against the performance of certain sectors in 2009, notably financials and technology. This is to be expected in a fund of this nature where Marriott's income focused investing style seeks dependable growth and steady income streams rather than the cyclical boom and bust of riskier areas of the market. Marriott looks for businesses which can outperform through a variety of market cycles remaining focused on fundamental value, old fashioned cash flow and strong management teams, attributes which lead to medium and longer term performance in more difficult times as well as in periods of rising markets..
|
| |
|
Marriott First World Equity comment - Sep 09
|
|
Thursday, 17 December 2009
|
Fund Manager Comment
|
The Marriott First World Equity Fund fell back in October thanks to a combination of falling equity prices and a surprisingly strong pound which, up until recently, had been a prime target for short sellers. Q3 results have, to date, been better than expected and equity market weakness was caused by profit taking rather than anything more sinister, in our view.
Certainly, any pull backs over the last few months have been treated by investors as a buying opportunity and we expect that the current modest wave of selling will meet an equally rapid buying flurry from those investors with cash still on the sidelines earning next to nothing on deposit. Interest rates are likely to remain unchanged when the Fed, the Bank of England and the ECB all meet this month; the gross yield on First World Equity is some 10 times greater than that available from cash deposits in major markets. Nonetheless, valuations are now offering fair rather than good value and we expect most of our returns between now and the year end to be generated by income rather than capital gains.
|
| |
|
Marriott First World Equity comment - Jun 09
|
|
Wednesday, 16 September 2009
|
Fund Manager Comment
|
Some of the momentum from earlier in the quarter was lost over the month of June. Opinions are very divided over the reason behind this modest correction in a number of markets. In some quarters it is felt it is too early to assume an immanent economic recovery is assured. The recent rally, largely driven by China stockpiling and indeed recording some early success with its stimulus packages may be inadequate to fully offset the deep seated problems in the west. The rebalancing of portfolios also appears to be largely complete for this stage of the economic and market cycle. Further evidence of the recovery is required before further tactical asset allocation can take place and therefore both economic and corporate data will be closely scrutinised over the summer months. Unfortunately the World index has been held back by the modest 3% return form the US equity market and this does mean global investors will pay increasing attention to US economic data in order to gain a better understanding on how the economy is progressing and the role it will play as far as the rest of the world is concerned. Although there is a risk that markets may move sideways for a period, one should not underestimate the number of opportunities that are available.
|
| |
|
Marriott First World Equity comment - Mar 09
|
|
Tuesday, 12 May 2009
|
Fund Manager Comment
|
March has been a month of mixed emotions as far as the equity markets are concerned. Returns have generally been very good with investors being rewarded handsomely in the majority of markets and there is little doubt sentiment improved as the period progressed. However, the fact that many markets touched new lows in the early part of the month does indicate that the economic downturn still has some way to go. There had been faint hopes a recovery may have been forthcoming in some key economies as soon as Q3, however the stage does increasingly appear set for Q4. The question we are asking is if now is the time to buy for the recovery or indeed if this latest rally is an opportunity to take profits/cut losses and move into cash. Before answering this question we need to look back to find the cause of the rally. The turning point in the equity markets came when Citigroup informed investors that it was profitable in January and February. Other banks have since followed suit both in terms of comments and actions (for example by buying in subordinated debt). As a result investors increasingly feel the banks are, at long last, now getting back in control of their own destiny. Given a strong banking sector is a vital ingredient for every economy, it is understandable why the markets have reacted in such a way. Beyond the banking sector there is little doubt many other companies will be reporting some very distressed numbers which will clearly highlight the degree of the slowdown. Many are still likely to fail or indeed need to be reconstructed and there is little doubt shareholders in some entities may still suffer some quite serious pain. It will not however be the numbers investors focus upon as companies report, although it will be these that make the press headlines. At this stage in the cycle the key part of any announcement will be the outlook, with the chairmans' statements being scrutinised for evidence the underlying business is starting to improve. A broad selection of "green shoots" would be a very positive factor although given the strength in many commodity markets recently, there is a risk of anything less being a disappointment. However, ultimately, the determination of the governments to resolve the downturn cannot be doubted and whilst we may have to be patient, we can to a degree be relatively relaxed that the first stage of the recovery is almost assured. It is after this that the real questions and investment dilemmas will arise as the cost burden for the global stimulus fall on individuals and business alike. The economic slump will result in massive change. For example, the developing world will undoubtedly increasingly demand a greater voice when it comes to determining global policies given the vulnerability they have experienced as a result of problems in the west. Many poor countries have suffered badly and require urgent assistance in order to avoid becoming an even bigger burden on the west. Finally, many countries are increasingly uneasy over the impact of the world's reserve currency being the US dollar, especially given the way the Americans are now printing money in order to stimulate a recovery and therefore devaluing other countries' reserves. Whilst this is not a new call, the rationale is now much stronger. As long as the US remains in the driving seat, this will not occur, but the global credit crunch will result in a long expected power shift with America's influence being diluted much sooner than expected just a few years ago and change at some point is almost inevitable. At this point it is impossible to evaluate the implications, however with such a backdrop we do gain comfort by investing in a broad spread of names with a global perspective in key sectors. The single asset class approach, if correct, will reap great returns, however as we go through this transition it is a much higher risk strategy than in the past. Therefore, to conclude, we firmly believe it is prudent to continue to drip feed cash into the global equity markets in order to take full advantage of the diversity of the income stream which ultimately feeds the dividend cash flow. We believe this will be a very valuable resource as a major global transition starts to takes place.
|
| |
|
Marriott First World Equity comment - Dec 08
|
|
Friday, 20 March 2009
|
Fund Manager Comment
|
Portfolio Review
Inflation Protected bond exposure maintained at around 12% overall.
AAA rated conventional bonds increased and exposure increased to 12%.
Equities now approximately 68% of the total.
Reduction in exposure to banks whose dividend may be under threat. Increase in Fixed Interest weighting.
Defensive sectors still generally preferred, including Energy, Utilities, Tobacco and Telecoms.
No real estate exposure in portfolio.
Yield Comparison at 31 December 2008:
- MIGF 5.66%
- Yield target 2.74% (JPM Global Gov Bond 2.43%, S&P 500 3.04%)
- US CPI 1.1% year-on-year (2.0% excluding Food and Energy)
Equity Market Review
Markets ended the year on a relatively good note after an appalling 2008. In dollar terms, global equities lost 20.9% of their value in 2008 despite double digit rallies in several markets in December. Once again, local currency returns were distorted by some momentous currency movements. In Europe, for example, markets gained a modest 0.75% in December but the swing of the euro against the dollar meant that such a movement translated into a gain of 10.6% in dollar terms.
The December rally was triggered by the realisation that interest rates would continue to be cut in all major markets in response to the growing threat of deflation. Ironically, deflation is generally considered to be negative for equity markets but there was a growing sense that the sell-off in October and November in particular had been overdone. Inter-bank rates are beginning to ease and low savings rates will eventually encourage savers to seek yield elsewhere. With the S&P 500, for example, yielding over 3% compared with a US discount rate of 0.5%, there is ample encouragement for investors to look to equities to provide income over bonds.
Elsewhere in the world, Asia and emerging markets generally enjoyed something of a rebound from the carnage of the previous few weeks and months, gaining 1.8% and 4.4% respectively in local currency terms. We do not, however, believe that such movements represent anything other than a relief rally at this point. It will take some time for the impact of lower interest rates to filter into the real economy and our inclination remains that of selling critically weakened companies (e.g. banks) into pockets of strength whilst building up positions in more robust businesses with strong cash flow, low debt and a progressive dividend policy on those darker days in the market.
From a currency perspective, we believe that sterling is probably in oversold territory and expect some of the recent movements to be reversed, particularly against the dollar, as 2009 progresses. Longer term, we remain nervous of the growing public sector borrowing requirements in most major markets (perhaps with the exception of Japan) but feel that President-elect Obama's spending plans will have a particularly detrimental impact on the US dollar over the medium term once the currency market's present obsession with a flight to safety has run its course.
|
| |
|
Marriott First World Equity Fund comment - Sep 08
|
|
Monday, 10 November 2008
|
Fund Manager Comment
|
September saw a marked deterioration in investor sentiment as the financial crisis dramatically returned to centre stage. Broad indices in Europe and the US lurched downward, with falls of between 9% and 13% being seen in local currency terms. The strength of the US dollar also impacted on the sterling and euro Indices, thereby extending the declines to around 15% on a US dollar-adjusted basis. The financial sector continued to hold centre stage as a succession of financial institutions in the US, including Fannie Mae, Freddie Mac, Lehman Brothers, AIG and Washington Mutual either folded or sought help from the Treasury. The pain, however, was not limited to the US, as Fortis, Bradford and Bingley and Hypo Real Estate, to name but a few, also succumbed to market forces. Other sectors also experienced selling pressure, with oils and commodity stocks taking the brunt as commodity prices continued to retreat.
The dollar continued to rally in the early part of September before retracing as the credit crisis intensified. However, it again built up steam towards the end of the month, leaving it about 4% up against the euro and 2% higher against sterling for September as a whole. The higher dollar also contributed to a decline in oil, although gold actually rose modestly on "safe haven" buying.
Immediate concerns about inflation have been rapidly giving way to genuine worries that the current freeze on credit markets will cause significant damage to global economic growth. Central bank intervention has increased, pumping vast amounts of liquidity into markets to stop credit completing drying up, but the ultimate solution will be a return of confidence that allows banks to start to trust one another again. The current process of trying to get a $700-billion rescue package through Congress in the US, which will allow the Government to purchase "toxic" assets from Banks will help, but further work needs to be done. All this central bank activity, however, could have inflationary ramifications over the medium term once economies begin to reflate, but this is probably the least of the problems at present.
Problems in the banking sector have now spilled over into the "real" economy, and this is a worrying development. Nevertheless, we still believe that central bank action will prevent a prolonged downturn, although it is probably too late to stop at least a technical recession. In this environment, volatility will undoubtedly continue, although we feel we are now very close to a significant bottom.
|
| |
|
|
