ARGONAUT ABSOLUTE RETURN has a boss, Barry Norris, who loves the challenge of a bear market
Fund manager Barry Norris is a contrarian. He goes against the crowd. The result is he usually makes money for investors when stock markets are in freefall, but tends not to do so well when equities are in a bullish mood.
His view is that equity markets are entering a new phase after 14 years of low interest rates and government money driving up the price of assets such as equities. High inflation and interest rates, he says, could trigger a sustained bear market to match that of the early 1970s.
Although Norris is modest enough to admit he may not be right – and he hopes he is not – he does believe that the investment fund he runs is a good portfolio diversifier worthy of investor consideration, irrespective of where markets are heading.
The fund is called Argonaut Absolute Return – and its objective is to generate positive returns for investors over rolling three-year time periods. Over the past three years, it has lived up to its name, delivering investors a return of 64 per cent. But it hasn’t been a smooth journey, with the fund on occasion seriously underperforming the FTSE All-Share Index – in 2018, for example and 2016.
Over the last five one-year periods, fund returns have ranged from 42 per cent (in the 12 months to March 25, 2020) to minus 16 per cent (in the year to March 25, 2019).
Like most equity fund managers, Norris makes money for investors by buying shares in companies and then hoping they will rise in value. But he also delivers them returns by ‘shorting’ stocks – using sophisticated financial instruments that make money when share prices fall.
‘My USP [unique selling point],’ says Norris, ‘is that I do something that DIY investors would find extremely difficult to replicate – make money when equity prices are falling. In bull markets, they don’t necessarily need a fund like mine. But in difficult markets, like we have today, Argonaut Return comes into play. It produces returns that are uncorrelated to stock markets.’
Currently, Norris says the only bull market that exists is in commodities – oil and metals such as nickel and lithium. It explains why the fund’s biggest exposure is to energy and mining companies – the likes of K+S, Europe’s largest supplier of potash for the fertiliser industry; Brazilian oil producer Petroleo Brasileiro (often referred to as Petrobas) and Norwegian oil and gas giant Var Energi.
Among those companies whose shares Norris has successfully shorted is electric truck manufacturer Rivian. Its shares were listed on the Nasdaq stock market in the United States late last year. They listed at $78 a share, rose to above $170 and have since fallen to below $50. He also made money from Swedish oat milk producer Oatly which listed in the US at $17 a share. The shares are now trading at just above $5. Norris describes these as ‘glamour concept stocks’.
A report published in the last few days from analysts at Investec identify a number of funds that, like Argonaut, are suitable ‘portfolio diversifiers’. Their selections are all investment trusts, listed on the UK stock market. They are Aberdeen Diversified Income & Growth; BH Macro; Capital Gearing; JPMorgan Global Core Real Assets; Personal Assets; RIT Capital Partners; and Ruffer.
It describes the trusts as having a ‘low correlation’ with equities and providing much needed portfolio diversification.
The stock market identification code for Argonaut Absolute Return is B7FT1K7 and the annual charges total 0.83 per cent. But there is a potential performance fee on top if the fund generates returns in excess of 5 per cent a year.