Axa Framlington Absolute Return Gemini Worldview, a top-down thematically driven global equity strategy fund managed by Mark Tinker, has enjoyed a return of 16.41 per cent in just over six
Axa Framlington Absolute Return Gemini Worldview, a top-down thematically driven global equity strategy fund managed by Mark Tinker, has enjoyed a return of 16.41 per cent in just over six months from its launch in April to the end of October.
‘The market has provided Mark with a true test of his abilities during these challenging conditions, as the global credit crunch bit and the MSCI World reached 2007 highs and lows within a two-month period,’ says Matthew Lovatt, Axa Framlington’s head of absolute return products.
Tinker’s investment process combines a top-down approach with bottom-up analysis to identify developing global themes. The portfolio is unconstrained by geography or sectors but is driven by the manager’s view of the overall business and credit cycle. Twelve of his 15 themes were profitable over the period, with Chinese consumer, global trade, and energy and scarce resources contributing most to performance.
‘A number of the Chinese consumer plays, which include some Hong Kong property developers have been very profitable and have run up very aggressively,’ Tinker says. ‘More recently I’ve reduced their stock specific impact on the portfolio. Over the six months various parts of the portfolio have taken turns at driving the return, so in a sense it is a more diversified portfolio than you might think.’
Tinker believes the global economy is in the second leg of the bull market and has maintained a net long position throughout the summer. ‘This is an environment to be between 70 per cent and 100 per cent positive. I moved to be 100 per cent around the time of the Fed rate cuts because I believed that the market was looking to move up – almost whatever happened.
‘Post the bounce it was important to focus on genuine growth stocks, and I remain sceptical of the apparent value in financials. I think volatility will remain high, but I suspect the big risk to portfolios now may be sterling weakness as the market starts to price in lower UK rates.’
The stock selection is complimented with a hedging policy that proved beneficial during the recent periods of uncertainty. Tinker was short on European financials, the world index and the bond markets at the end of June, before the collapse of the US sub-prime market.
‘From a fundamental view point I believed the credit cycle had turned and that the Asians have got enough bonds, and they now wanted to invest in real assets which is a key theme for me,’ Tinker says. As a result I was effectively short the US bond markets before it sold off from 4.7 per cent up to 5.2 per cent.
‘I had a put spread on the European bank sector with a view that I was trying to insulate the portfolio from tail risks. I thought that if anything was going to hit the market it was going to be something from the credit markets – which turned out to be true.’
The Axa Framlington Absolute Return Gemini Worldview fund is an unregulated collective investment scheme domiciled in the Cayman Islands and listed on the Irish Stock Exchange. The fund has an absolute return focus, targeting annual returns of 15 to 25 per cent with volatility averaging around market levels.
An unconstrained global long/short fund, it is driven by a small number of high conviction themes implemented in a diversified stock portfolio. The fund is a value buyer of hedging to protect the tail risk in the portfolio.
Tinker has 20 years’ experience as a sell-side analyst, having worked at independent brokerage Execution, as head of pan-European strategy at UBS, and as head of equity and debt strategy at Commerzbank.
He joined Axa Framlington in November 2006 and launched the Absolute Return Gemini Worldview fund in April 2007. More recently he has also taken over management of Axa Framlington’s USD200m long-only Managed Growth Unit Trust. The firm manages some GBP9bn from its offices in London and Edinburgh.
