The cards may be “stacked towards a further correction”, says Jeremy Tigue, the 47-year-old manager of the £2.6bn Foreign & Colonial Investment Trust. But that’s just a good reason for investors to “start lacing up their buying boots”, he tells Money Marketing.
Nervous that US subprime woes could unleash a wave of volatility in the markets, he began reducing the trust’s gearing (borrowing levels) to 5.7% in May, its lowest level since 2000. He subsequently started moving into more defensive areas, such as large-cap stocks. Invested across the UK, Asia, US and Europe, the fund already has a diverse global reach. As the granddaddy of investment trusts, the F&C trust has seen its fair share of boom and bust since it was founded back in 1868. But Tigue thinks it can get through this one as well, as “there is a clear disconnect between market behaviour and the underlying economic picture”, he tells Scotland on Sunday. “In this respect, 2007 is starting to feel very similar to 1987, when markets took a short, sharp hit, providing savvy investors with a breadth of opportunities.”
The fund returned 10.1% in the six months to June and has paid out 82.9% over the past three years. And on a chunky discount of 11.1%, now could be the time to buy. Even though it seems likely that further turmoil lies up ahead, “our diversified exposure both in terms of geography and sectors should protect us from any pull-backs”, he tells Financial Adviser.