Interactive Investor

"Bulls in charge" of Killik's Growth Portfolio

15th April 2014 15:18

Helen Pridham from interactive investor

Since the growth portfolio was rebooted at the beginning of January, stockmarkets have been distinctly wobbly, although investors remain in favour of equities.It started when the new chair of the US Federal Reserve, Janet Yellen, seemed to indicate that interest rates may start rising earlier than expected; and then there was the uncertainty caused by the problems in the Ukraine.But Mick Gilligan, head of research at stockbroker Killik & Co and the manager of Money Observer's hypothetical £100,000 growth portfolio, believes sentiment towards shares is still positive. He says: "We are five years into a bull market, so investors are becoming more sensitive."

Stockmarket sell-off

However, since the fund was purchased its price has risen only slightly, and he admits that with hindsight he may have moved a little early.Overall the portfolio has stayed in positive territory. Its best-performing holding was BlackRock Gold and General, which returned more than 11% over the quarter.

Gilligan says the main reason is the bounce-back in the price of gold and gold-mining equities, which had become very oversold at the end of last year. "Naturally the events in the Ukraine also improved sentiment towards gold," he adds.The other top performer was M&G Strategic Bond fund. This fund invests almost exclusively in high-quality sterling corporate bonds, and their progress tends to be driven by government bonds, which also recovered strongly at the beginning of the year.However, the impact of these two holdings on the portfolio's overall performance is limited by their modest size. Jointly they account for less than 4%. Fortunately, the same thing applies to the two worst performers - HSBC MSCI Japan ETF and BH Macro - which have each fallen by 7% in value in 2014.

Events in Japan

After a strong 2013, the Japanese market appears to have lost its lustre this year. One of the concerns among foreign investors is a downturn in domestic consumption following the government's decision to increase the Japanese equivalent of VAT.

There was also some technical selling by hedge funds. But Gilligan is sanguine about the long-term investment story in Japan and believes there are bound to be some wobbles along the way.Events in Japan also contributed to the slippage at BH Macro, although its price fall was increased by the widening in its discount to net asset value.

According to Gilligan, three of the fund's positions since the year end - including holdings in Japanese equities - haven't worked out particularly well. As a result it is down around 3% over the past year, which has led to some disillusionment among investors.