Ask A Fund Manager
The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Marcus Today portfolio manager Ben O'Leary reveals the two ASX shares investors can lean on during chaotic times.
Investment style
The Motley Fool: How would you describe your fund to a potential client?
Ben O'Leary: My name's Ben O'Leary, I'm a fund manager here at Marcus Today. I've been in the role for about 12 months. Started with the income fund, and then I've taken over our growth fund as well, in combination with Chris Conway, who's the co-manager here. I've been at the company for around four years now.
We've got two SMA [separately managed account] funds. They're essentially a managed fund, except the clients hold the ownership of the shares. We've got a growth and an income [product] — they're both active with a top-down investment style. The growth has a focus on companies with growing operations and revenues, and we use a proprietary factor model that we've developed to narrow our focus there and the stocks that we're looking at. Looking to beat the broader market, inclusive of dividends over a three- to five-year period on that one. In the income [product], we've got a primary focus of building a portfolio of reliable dividend payers with a yield above the market average.
MF: In terms of this interview, are we talking more the growth or the income product?
BO: The growth [product] is the main event. It's got the larger amount of funds, and it's also probably a little bit more exciting to talk about than income. Income is income. It's got many of the same names that you hear about, so growth is what I'll refer to.
Biggest convictions
MF: What are your two biggest holdings?
BO: It's nothing too exotic here because we're all retail money — we are servicing mostly super money.
Appropriately, we've got holdings in the big end of the market. So the two biggest holdings we have are BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA), which are the two biggest stocks in the market. And they've held us in pretty good stead over the last six to 12 months. It's been a good time to be in materials and financials with the kind of macro environment that we've seen.
MF: Do you foresee those two sectors leading the way for the rest of the year as well?
BO: Yeah. The market is ultimately pushed around by inflation, GDP numbers, and interest rates. And interest rate is the big focal point at the moment. We know they're going higher, it's just a matter of how fast. But we know materials and financials are both areas that do benefit from higher rates, so we've got no real concerns around being in those two.
Obviously there's some little things that can come along with the specifics of the companies — the iron ore price and CBA has results coming up in a couple months. But I would foresee that we would continue to have some pretty large holdings in those two.
MF: With the current uncertain times, one camp of experts reckon the bull market will resume and by the end of this year, we'll end up higher than where we started. And then there's the other camp who says this year is a bit of a write-off.
How do you feel?
BO: I feel cautiously optimistic. I think we're still in an environment where, even with the interest rates moving up, which obviously puts pressure on equities, we're still talking about a cash rate that's below 2% or a tiny bit above zero, which means that there is a lot of money in the world that needs to find a return greater than that. And equities is the main place to do that.
It's a lot more accessible than going and buying property and trying to get yield from rental or whatnot. So I think there's going to continue to be money in there. You're going to have to be careful where you play — but I'm cautiously optimistic.
