Monik Kotecha

Monik Kotecha questions the attitude of some international managers who are holding high cash holdings. Monik’s Insync Funds have registered top quartile performance while being fully invested (residual cash position is below 3 per cent). High cash holdings are more expensive than the put options that he uses on one of his two international funds.

“Some international fund managers are sitting on 15% of FUM in cash which is hard to explain when we are seeing so many good investment opportunities offshore. Frankly, it seems to be an intellectual copout at worst or a cynical exercise in funds’ retention in the face of difficult markets.

“Large managers can be tempted to protect their own brand (FUM) by using cash to smooth out the unit price volatility afraid investors will leave them. The hit rate for managers timing markets is poor,” said Monik Kotecha, CIO, Insync Fund Managers.

Monik states in his June performance report that he does not raise cash in the fund to protect the downside. Nor does he see sense in selling high-quality sustainable growth businesses to invest in defensive sectors, such as utilities, based on the short-term outlook. Our opportunity set is so large that in ten years we have never run short of places to invest.

See the June performance report.

Investors typically are well diversified. They are investing in equities to deliver growth. Insync’s Global Capital Aware fund has been designed for investors requiring some downside protection but who also don’t want to not miss out on rising markets.

Missing out on the ‘growth’ part of growth happens when markets rebound

After all, missing out on growth in the growth part of your portfolio, particularly in very low interest rate environments, may well result in investors not achieving their objectives. Miss also the few big recovery price rise hikes that typically occur early in a recovery, and this creates large under performance over longer time periods that cannot be made up.

By Monik Kotecha, CIO

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