Rehab fund race underperformed for March

MARCH WAS one of the most disappointing months to date for the Rehab Great Investment race, with only one of the five participants making gains during the month.

The underperformance reflected in part the general market unease during March fuelled by macro political and geographical events, namely the earthquake and tsunami in Japan and continuing political unrest in the Middle East.

Although global equity markets delivered positive returns and the effect on emerging markets was limited, the events led to an underlying crisis in confidence in the markets.

Looking at the individual performance of the five participants in the race – a charity investment race in which five fund managers are given €100,000 to invest in order to raise money for Rehab – only one team, Irish Life Investment Managers, made gains during the month, advancing 2.4 per cent.

According to fund manager Séamus Magner, the fund made gains on British property company Shaftesbury, German potash company K S and German tyre company Continental.

However, it lost 2.4 per cent on a Eurostoxx ETF (exchange traded fund). The fund held three stocks at the end of the month – Danske Bank, B Sky B and the German engine maker Tognum, which is currently at the centre of a takeover bid from Daimler and Rolls Royce. The strong performance by ILIM leaves the fund in second position in the overall race.

Merrion Investment Managers, which has consistently been the best performer in this year’s investment race, fell back slightly in March, although it still maintains its position as the forerunner overall, with the fund standing at €126,328 at the end of March. Its loss of 0.6 per cent during March was attributable to its position on Aer Lingus.

Having been a key driver of the fund’s strong performance in the first few months of the investment race, the fund’s exposure to the airline stock has had a negative effect on the fund for February and March. The loss on Aer Lingus was offset by exposure to materials stocks BHP Billiton and Anglo American and the drilling contractor Songa Offshore.

Gains from broad euro zone and US market positions also bolstered the overall performance.

Kleinwort Benson Investors was in third place last month and remains in third place overall, with its fund value standing at €109,292.

It was a relatively uneventful month for the eight stocks in the portfolio, according to fund manager Noel O’Halloran.

Hong Kong jewellery maker Chow Sang Sang was the best performer, up 6 per cent on the month, offsetting a fall of 10 per cent from Irish building stock Grafton.

The Rehab Investment Team, which finished in fourth place last month, also had a relatively quiet month.

According to Frank O’Brien, who is heading up the fund, the kind of high-quality stocks held by the fund did do well, but in a weak market. The fund suffered from the impact of weaker sterling, while currency exchange rates also affected its cash balances in sterling and dollars.

AIB Investment Managers continued to suffer from its focus on Japanese equities. While the strategy of investing in the Far Eastern market has failed to deliver since the race began in November, it was compounded last month by the earthquake and tsunami in Japan.

Overall, only three of the five funds are in positive territory, with the total value of the fund standing at €537,848 as of March 31st.