Scotia DBG Investments' Global Diversified Value mutual fund puts in a poor performance

Published: Friday May 2, 2008

The global credit crisis dampened the performance of Scotia DBG's flagship hard currency Global Diversified Value mutual fund. Nevertheless, Canada-based fund manager Michael McCarthy of AllianceBernstien, says that "corrective forces are at work," which means that investors have a window of opportunity to buy quality investments at discounted prices.

Speaking at the Scotia DBG Investments seminar held at Terra Nova Hotel on Wednesday, McCarthy noted that the Global Diversified Value mutual fund, which requires a minimum investment of US$5,000, lost 10.5 per cent during the first quarter of 2008 and lost 9.8 per cent for the one-year period ended March 31, 2008. McCarthy noted several factors contributed to the poor performance of the fund.

"Capital market turmoil and fears of a US recession weighed on several of our auto holdings. Narrower refining margins hurt several energy companies we hold in the fund." The fund manager added, "Market anxiety remains elevated. This is as a result of declining consumer sentiment suggests fears of a lasting and broad-based economic slowdown around the world. After several calm years, extreme daily price swings have become the norm in global stock markets."

However, there is good news. Despite the losses suffered by the fund, McCarthy noted that "All major markets lost ground amid a widespread flight from risk; the impact was softened somewhat for investors based in weaker currencies and sustained demand from emerging markets and potential industry consolidation helped commodity stocks. A number of our financial holdings held up better than the sector." And McCarthy believes that better times are ahead for mutual fund investors. "Central banks and the US government are taking aggressive action to break the downward spiral. Financial firms have replenished capital, with the help of sovereign wealth funds." This means that value opportunities are picking up, equity valuations are more attractive and valuation spreads are widening." One of the opportunities that the fund will take advantage of is the US-based insurance company AIG.

McCarthy told the audience that, "AIG's operations are highly diversified by business line and geography. The company has a long history of above-average earnings growth and yet the stock is trading at a historically low valuation. However, our stress tests suggest that investors fears are greatly exaggerated." And go forward, the opportunity to pick up quality stocks on discount should provide enhanced returns for Scotia DBG mutual fund clients.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20080502T000000-0500_135177_OBS_SCOTIA_DBG_INVESTMENTS__GLOBAL_DIVERSIFIED_VALUE_MUTUAL_FUND_PUTS_IN_A__POOR_PERFORMANCE.asp