Why Munro is waiting to utilise cash
Munro has indicated the difficulties of finding opportunities for investment with the fund holding over 40% of its portfolio in cash.
In a quarterly update, the firm said this was currently a difficult environment but its Global Growth fund had been helped by capital preservation tools such as shorts and put options which helped minimise volatility.
The four signposts it was watching before it moved out of cash were:
• Stabilisation of long-term bond yields
Munro said they felt long-term interest rates were in the process of peaking regardless of how many interest rates were needed to combat inflation.
• Attractive valuation multiples;
Valuations multiples had de-rated significantly since the start of the year and Munro said it felt we were close to the bottom of the de-rating process so long as interest rates had peaked.
• Earnings expectations to reset lower
There had been limited downward earnings revisions despite the headwinds from supply chains to input cost pressure so earnings needed to be revised downwards significantly as economic growth slowed, likely to start during the upcoming earnings season.
• Time
Markets were only halfway done with the bear market, which typically lasted just under 300 days, so investors should be patient and wait for the market to look past uncertainty and towards normalized earnings for stocks.
“We remain excited about the opportunities presenting themselves out of this current bear market and are simply attempting to remain, prudent, disciplined and patient in what is a difficult time for markets.
“We would encourage investors to take a big step back and look at where we stand today in a broader landscape. Equity markets have been strong for a long period, but volatility is here and markets could be difficult for a while.”
The comments followed similar commentary by Platinum which was holding almost a quarter of its $6 billion International fund in cash.
AUTHOR
Laura Dew
Recommended for you
The role of alternative investments is to diversify a portfolio and capture differentiated sources of return, according to UBS Asset Management.
Private investment opportunities are moving up on the list of what investors want from their financial advisers, according to Natixis IM, and over half of firms say they are offering them more strategies.
Two asset managers have each expanded their product suite with the launch of new global equity funds for Australian investors.
Perpetual has confirmed it is in exclusive talks with global investment company KKR regarding an acquisition of its corporate trust and wealth management businesses.
