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GAM’s Hepworth: Global markets will rally for rest of Q4

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29/10/2014
Fund manager Charles Hepworth of GAM expects the market falls seen earlier this month to spur an end-of-year rally, making up the losses suffered by equity investors.
GAM’s Hepworth: Global markets will rally for rest of Q4

The investment director in charge of GAM’s discretionary fund management team expects markets to be boosted by the ECB beginning its bond buying programme last week and expectations of a delayed rate hike by the Bank of England.

Hepworth (pictured) said: “It is good for markets to get a bit of a fourth quarter rally underway and we think we will certainly get to where we were at the start of the year [across global markets].

“Talk of more QE has been generally supportive of all equity market movements since mid-October and [bond buying] by the ECB will push European markets up considerably.”

Over the six weeks to 16 October both emerging and developed markets suffered a significant sell-off, with the likes of the FTSE 100 and European indices dipping into correction territory. But global equities have since regained ground, and Hepworth believes there is more to come.

“We think the value is in European and Japanese equities, because hot money will support these markets in the future, even though those bets have not worked out this year,” Hepworth said.

“Europe and Japan have significantly underperformed the US in the sell-off, so we are adding to these positions and remain underweight the US. Generally, we are overweight those countries doing more QE and underweight those stopping it.”

Hepworth is also particularly positive on frontier markets, which have significantly outperformed emerging market equity funds in his portfolios: the $2.1bn (£1.3bn) Templeton Frontier Markets fund he holds is up 6% year to date, according to FE.

To take advantage of the expected rally in European equities, the manager has recently added a new European fund to his portfolios, complementing an existing holding in Niall Gallagher’s GAM Star Continental European Equity fund.

The new addition, Julius Baer Euroland Value Stock, is more value-driven than Gallagher’s fund. Year to date the Julius Baer fund is down 10.8%, while GAM’s fund has fallen 7.5 per cent, as European equities have sold off.

“Europe has been particularly tricky to find equity managers that outperform the market,” Hepworth said. “All [European] equity managers are finding it really tough at the moment and there is no one particular style that has worked.”

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