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Risky fantasies pay off for fund selectors

During the first four months of EIE’s Fantasy Fund Picker Competition some fund selectors revealed themselves as talented opportunity investors. Alberto Montero from MoraBanc in Andorra and Tim Peeters from Portolani in Belgium managed to achieve double-digit returns with a very concentrated portfolio. 
 
Click here to see the portfolios of the three best performing fantasy fund pickers so far.

China leverage

Montero, who generated a total 4-month return of 14.66% and is leading the competition now, showed maybe one of the best examples of a concentrated portfolio, as half of the funds he selected for his portfolioalt='' are invested in Chinese equities alone. Moreover, among these is a leveraged ETF which is designed to beat the FTSE China 25 Index by 300% when markets go up, while losing the same percentage in a downward market.
 
“When constructing this portfolio, I realised that Chinese equities were undervalued, so I decided to include this leveraged ETF which actually also forms a large part of my personal investment portfolio”, Montero says. “I estimated at the time it had a return potential of 60%, and up until now it only has returned 51% so I’m still clinging to it.”

Golden bet

Tim Peeters’ portfolio is possibly even more concentrated, as six of the eight funds in his portfolio are invested in alt=''gold mining companies alone, while the remaining two have exposure to other precious metals as well. “My strategy to beat the competitors in this competition was to put all my weight in an undervalued sector and offer good upside on the short term,” Peeters explains. “In March, both emerging markets equities and precious metals fulfilled these criteria. In the real world, I would then have created a portfolio combining both themes.” 
 
But Peeters takes part in the Fantasy Fund Picker Competition to win. “I would rather bet on a contrarian theme like gold as I expected a number of fund selectors who would construct a portfolio skewed to emerging markets. Besides that, gold mining companies have strong fundamentals though they are completely unloved by investors. A comeback of investors to this relatively small market could lead to very quick price gains.”

A winning combination?

Rui Pacheco from Banco Best in Portugal, the third fund selector who managed to achieve a double digit return, must have had similar thoughts as Peeters, but then decided to include both emerging markets funds and natural alt=''resources funds. “I took into consideration regions and thematics, and identified emerging market equities and natural resources as the most promising sections of the market.”
 
Pacheco’s portfolio returned him 14.23% over 4 months, trailing Montero by less than half a percentage point. And he is confident he will catch him in the coming months. “I realise my bets are risky, and especially the Russia fund I picked is tricky, but I wouldn’t sell any of the funds I own now if I would be given that opportunity. The fund that has surprised me most is actually the Indian equity fund from HSBC which I selected. I had not expected that it would return 25% right after the Indian elections.”
 
Please note that the 2014 Expert Investor Europe Fantasy Fund-Picker contest is now closed to new entries. A summary of the competition rules can be viewed here.
 

 

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