Coombs: Volatility brings unique opportunities in ‘unloved’ assets

Volatile market conditions have presented a unique opportunity to gain exposure to assets previously considered “toxic”, according to David Coombs, head of multi-asset management investments at Rathbones.

Despite their negative reputation, some multi-asset managers are now looking again at funds with exposure to these kind of assets, although many continue to shun the products after being burnt in the past.

“The psychological scar from 2008 means that ‘leverage’ is still a dirty word,” said Coombs. “But investors could be losing out by focusing on historic risk when looking at the likes of mortgage-backed securities, hedge funds, and private equity.

“When these kinds of investments are as unloved as they are, it is usually the right time to go in, especially with the cost of capital so low.”

Some of these investments were hit hard during the 2008 credit crisis.

“After selling off after 2008, property and private equity investment trusts never really recovered and are now selling at a 30% to 40% discount to net asset value,” he added.

Five funds exposed to ‘unloved’ assets

1.Pincess Private Equity

Investments include primary and secondary fund investments, direct investments and listed private equity.

2. Electra

A single-manager private equity fund which has a portfolio of private equity assets including direct investment, fund investment and secondary buyouts of portfolios.

3. HG Capital

Also a single-manager private equity fund, focusing on healthcare, industrials, services, technology, media and telecoms and renewable energy.

4. CATco

A catastrophe reinsurance provider, which has seen premiums rise recently due to the unusual number of global natural disasters.

5. Carador

This fund focuses on investment in CLOs, and Coombs holds the fund in his Enhanced Growth portfolio.