Short positions pay off for Cazenove’s Marriage

Cazenove’s Paul Marriage said the short positions in his Absolute UK Dynamic fund have helped limit the effects of the August sell-off but warned September could be “similarly tough”.

Marriage, who also runs the UK Smaller Companies fund at Cazenove, acknowledged his funds have not been completely immune to the sell-off and said he has been buying on weakness.

Marriage’s outperformance has propelled his funds to the top of their respective IMA sectors over one year, with the longer-running smaller companies fund also top quartile over three years. UK Smaller Companies has returned 35.6% in the year to 24 August against a sector average of 15.1%, according to FE, with Absolute UK Dynamic returning 21.9% versus an absolute return sector average of 2%.

The manager said Absolute UK Dynamic had benefitted from short positions on sectors ranging from mining services to industrial engineering, as well as a short on the FTSE index itself.

“The short book has clearly done its job. Our index short did very well. We have ended up slightly long right now but I imagine our next move will be short again,” Marriage said.

He added he had taken the opportunity to cover out some short positions that had performed “very aggressively”, and has been adding to positions in his smaller companies portfolio. “When we have been trading stocks we have been careful to trade more liquid stocks. But I have been investing in the small-cap fund across the piece. There has not been much I have not been adding to,” he said.

Some key stocks in which Marriage has been building up his positions include chemicals firm Elementis, online dating site Cupid, corporate travel company Hogg Robinson and derivatives platform vendor Patsystems.

He has been looking to deploy more cash in the past week but said he is not turning aggressively bullish.

“These are often defining months, but there is no reason why we will not get a similarly tough month in September”.

However, he added market moves at the start of August did not suggest a environment of doom and gloom over the long term.