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Here’s how these top fund managers are investing in this ASX bear market

With the S&P/ASX 200 Index (ASX: XJO) down 0.37% today, I’d wager many ASX investors would be feeling a little confused right now. Shortly after open, the market was down over 2.3% – so we have just seen a 2% swing in sentiment in just two hours.

The ASX 200 couldn’t make up its mind yesterday either – rising almost 2.5% before finishing the day 0.6% lower.

If you’re looking to invest today, these sorts of movements would be driving you insane. Have we found the bottom yet? Is this a dead cat bounce and a giant bull trap?

If you’re feeling this way, I think the best thing to do is to take a look at how professional fund managers are investing – those lucky investors who get paid to manage other people’s money.

Here’s how 2 of them have been investing in this ASX 200 bear market.

Dion Hershan

Dion Hershan is head of Australian equities at Yarra Capital Management. According to reporting in the Australian Financial Review (AFR), Hershan is looking for bargains amidst the wreckage of the bear market. He is doing this through the lens of “medium-term earnings power”. “What we observe from a profit perspective in the next 12 months is meaningless,” he says.

Remembering how many bargains the GFC back in 2008/09 offered up, Hershan is trying to find a repeat of this lucrative experience. “There were a lot of things that, with hindsight, that were absolute gifts,” Hershan stated to the AFR – recalling how Commonwealth Bank of Australia (ASX: CBA) offered a capital raising at $27 a share.

If you want to follow in Hershan’s footsteps, you’d better get the shovel out if you spot a bargain right now, in my view.

Hamish Douglass

Hamish Douglass is one of the more famous fundies on the ASX. He is the Chief Investment Officer (and co-founder) at Magellan Financial Group Ltd (ASX: MFG), which has nearly $100 billion in funds under management in various funds such as the Magellan Global Trust (ASX: MGG). Therefore, it goes without saying that when Douglass has something to say, it’s probably well worth listening to.

Last week, Magellan (through Douglass) released an update for investors that outlined how Hamish Douglass is viewing the current market conditions. In this release, he stated:

“We should remind people that we have about 85% of the portfolio invested in global equities and our portfolio is positioned to do well if the economic recovery is better overall than investors envisage.”

However, he also noted:

“We’re not thinking of moving out of cash at the moment. We need to better assess how this crisis is likely to play out. We need to assess how deep and long the recession might be and whether or not central banks are across all the issues around financial stability. History doesn’t provide a good reference point for anyone on what might happen next.”

Foolish takeaway

Well, there you have how two leading ASX fund managers are viewing the current market conditions right now. I think both managers are preaching the duel virtues of prudence and conviction at a time like this and have a foot in both camps, so to speak. I think at least taking this advice on board for your own investing would be a wise idea for most ASX investors today.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.