Smith & Williamson Enterprise Fund: Why we have no shorts in the materials sector
The UK’s mining and materials sector is offering investors a range of select opportunities in an environment of rising bond yields, Smith & Williamson’s Mark Boucher has said.
Boucher, manager of the £145m* Smith & Williamson Enterprise Fund alongside co-managers Mark Swain and Rupert Fleming, said some mining and materials stocks continue to look attractive in an environment where some of the ‘bond proxy’ sectors are struggling due to rising US bond yields, which recently moved above the psychologically-important 3% level.
As such, the Fund – which can take both long and short positions – currently has long exposure running at 5.4% in the materials sector and has no short positions among miners and materials companies.
“The materials sector does look relatively attractive now, and we have long positions in the likes of CRH and Glencore,” Boucher said.
“The big question that was hanging over the miners in particular was whether they had finally done enough to change the way they operate, and we think some of them have taken positive steps. Others have been under pressure from activists.”
Both CRH and Glencore are within the Enterprise Fund’s long book, with the materials sector once again a hunting ground for fund managers as assumptions of “lower forever” interest rates finally start to dissipate.
“Areas such as mining and materials tend to be resilient when bond yields are rising, and now those yields are indeed moving up around the globe with US 10y Treasury yields climbing above 3%, they offer better prospects compared to sectors such as utilities,” Boucher said.
“Equity market volatility this year has reminded investors that markets do go down as well as up, and while we don’t believe it makes sense to take large binary view on sectors in either direction, we don’t see any reason to be short materials currently,” Boucher said.
*as at 30.04.2018.