Argonaut's Norris: Why I am hedging against further QE

Argonaut Capital's Barry Norris is taking positions in Swiss property and increasing exposure to gold miners within his funds, claiming more QE is almost inevitable.

The manager of the £322m European Alpha fund - who split his company from Ignis earlier this week - said efforts from US and European policymakers to work their way out of the debt crisis meant more stimulus was a virtual certainty.

He has therefore been upping his exposure to assets which act as a hedge against central banks printing money, such as the Swiss franc.

"Interest rates (in Switzerland) are at zero as the central bank is trying to discourage investment in the Franc. This is leading to a favourable backdrop for property investment and is a hedge against printing money, which seems to be the only solution for central banks."

He has around 6.5% invested in Swiss property companies such as Swiss Prime and PSP Swiss Property.

The manager - whose fund is one of the top performers in the sector over the last three years - is also in the process of increasing his 6% position in gold miners as a way of diversifying portfolio risk.

"Gold continues to be in a bull market, which is fair enough given interest rates will continue to be low and central banks will be printing money. The share prices of gold miners have corrected 30% to 40% whereas the gold price has been reaching new highs."

However, he said during the recent market volatility he has been reluctant to make drastic changes to the portfolio, having moved defensive earlier this year - a move which has paid off when looking at performance figures.

Over the three months to 12 August, although the fund reported a 12.2% loss it is ranked 6th in the Europe exc UK sector out of 110 funds. The average fund lost 17.1%, according to Morningstar.

The fund was overweight cyclicals for several years before this position was reversed in March in favour of defensive sectors. The fund has had no exposure to eurozone banks or Southern European countries, holds 5% cash and focuses on German and Scandinavian investments.

"We are still fairly cautious and, although equities offer good value, valuations are based on earnings and dividends which might be revised downwards. We are waiting for policy response," said Norris.

Norris also confirmed he is looking to recruit a chief operating officer to oversee the transition of Argonaut into a more independent boutique. Investment Week recently revealed Argonaut would be changing the terms of its joint venture agreement with Ignis Asset Management, with Norris and Russ taking management control, owning 60% under the new structure while Ignis reduces its equity stake from 50% to 40%.

The transition is expected to be complete by the middle of next year following further distribution and investment hires. Norris and Russ will continue to head up the Argonaut funds - consisting of European Alpha, European Absolute Return, European Enhanced Income and European Income - which have combined assets of over £1bn.

"We believe there is huge potential in our core European range," said Norris.

"We have the Alpha and Income products and plan to start marketing the absolute return product next year once it has gained a three-year track record. We are not ruling out eventually doing other things.

"European equities as a whole are still a very big market place. The key thing is to continue to deliver investment performance in funds which buyers find attractive and relevant."

Ignis' interest in Argonaut will form part of Ignis Partners, an Ignis Business Unit established in 2010 to hold its boutique investments. Ignis Partners also holds investments in Bryan Collings' EM boutique Hexam, which split off from the group in July 2010, and Castle Hill Asset Management, the specialist credit investment manager, which was established along equivalent lines when the business was launched in January 2010.

Ignis will continue to distribute Argonaut's funds in continental Europe.