MORE CHEERFUL NEWS THIS MONTH

Following a very poor August stock markets have seen a strong recovery this month. Man OM-IP funds moved in an opposite direction to stock markets in August (good reason for diversification) but the higher prices are only now about to be reflected in valuations. The added strength of the Australian Dollar will have pushed up values even higher for USD investors. Gold has been reaching record highs almost every day so clients in gold or precious metals funds will see a further boost to their portfolios. A combination fund, Man AHL Gold gained 10.07% in August. About the only bad news is for those holding USD cash which has sunk against just about every currency. With the US government talking about more quantative easing (in English, printing money) this process is likely to continue, although the GBP and Euro have problems of their own.

It would be nice to think we are on a roll that is going to continue but to be realistic we need to keep in mind that most of the western world has a huge debt burden and while countries are trying to tackle it there is considerable resistance, particularly from labour forces that are loathe to lose benefits won over time. Cost cutting may lead to efficiencies but job losses on a large scale mean less consumer spending, fewer home sales etc.

Where investors are concerned, markets do not always move logically. Timing the markets correctly has proved almost impossible as even some experienced fund managers have found. The best strategy is to maintain ample liquidity and ensure a steady build-up of conventional assets complemented by 'outside the box' assets that offer opportunities for growth when the basic asset classes are stagnant.

CASUALTIES OF THE CRASH

We are regularly monitoring funds that hit the kerb when liquidity dried up in 2008. Momentum AllWeather has redeemed most of its holdings but up to 30% of the fund is retained in a special share class which can be redeemed only when underlying assets are finally sold. The same will apply to the Symphony Global Alternative Strategies Fund when the bulk of the fund is released later in the year. At the moment it cannot be sold. Foundations Capital has not been able to produce audited valuations since 2008 when the credit crunch took away the loan facility which it relied upon for its business model. We understand however it is on the verge of securing a new facility and that it should be operational again in the near future. Similarly the LM mortgage funds have been able to secure a new banking facility which should soon bring their liquidity and operations back to normal. For many funds it has been a tough time but the worst must now be over.

NEW FUND FROM AEQUUS

On the subject of 'outside the box' investments Aequus has launched a new Argawood and Forestry Sub-Fund to complement the existing Agarwood Fund. Mindful of the liquidity problems that hit funds in 2008 the fund will allocate 25% to listed securities, cash and near-cash assets. The fund should be seen as a minimum five year investment. Redemptions in excess of 10% pa in the first three years would be subject to a penalty. Returns targeted are 10% to 12%pa. Minimum investment $25,000.

ARGENTUM LITIGATION FUND TAKES OFF

This new 'outside the box' investment opportunity was well received by clients in our Thailand and Indonesia branches who subscribed the equivalent of $1,000,000 to the issue that closed on September 3. A new issue is now available, closing in October. It offers the same potential returns as the last one. There are two options; one requires a minimum investment of GBP25,000 which entitles the investor to a 1% share in the winnings from each case with no upper limit plus return of capital. The other, with a minimum investment of GBP10,000, has additional layers of protection but returns are capped at 15%pa plus limited win bonuses. Investors will be able to monitor the progress of their cases on the Internet. The investment term is two years.

The fund provides financing to mainly UK law firms for large cases (minimum GBP500,000) where there is at least an 80% chance of success and where an insurance company will refund the costs should the case be lost.

[Note: My first reaction was that returns of this magnitude were not realistic or implied high risk. After careful evaluation it must be said that there has to be an element of risk but the risk is mitigated by the insurance protection offered. I have invested in the Units myself so will be following the progress of the fund with even more interest! - CMB]

We are planning a number of seminars and briefings in Jakarta and Bali. Please contact your adviser if you would like to attend or would like more information.