Firm That Began Year Bullish and Fully Invested Is Now Half Cash

(Bloomberg) --

Munro Partners was bullish to start 2020, but now holds almost half its portfolio in cash following the coronavirus-fueled global equity sell-off.

The Melbourne-based international equity manager had 48% in cash as of the end of March, Nick Griffin, founding partner and chief investment officer said on a webinar Wednesday. That’s a glaring departure from the start of the year, when the flagship Munro Global Growth Fund was fully invested.

“I was probably one of the most bullish people out there at the start of this year,” Griffin said. “We are looking forward to catching the upside of the next bull market; we are just saying it’s probably a time to be a little prudent.”

It’s “our full intention” to be fully invested again in the future, he added.

Munro, with about A$1 billion ($615 million) under management, weathered the carnage that plunged global stocks into bear territory in the first quarter thanks to a mixture of hedging positions as well as holdings in Amazon.com Inc. and Tesla Inc., whose shares outperformed in the first three months of the year. It trimmed holdings in Airbus SE and sold luxury-good companies early in the sell-off, Griffin said.

The flagship fund returned 7.6% in the March quarter compared with a decline of 9.7% for its benchmark, the MSCI All-Country World Total Return Index in Australian dollar terms, the firm said. While its long positions fell 12.6%, gains from short positions, portfolio hedging and a slump in the Australian dollar more than made up for the losses, it said.

Among the fund’s top three holdings are Amazon, Microsoft Corp. and Alibaba Group Holding Ltd. It entered the second quarter with a net exposure of about 51%, Griffin said compared with usual levels of 70% or 80%.

We are “significantly more invested than we were through March and February, but still not fully invested, so we’ve sort of got a foot in each camp at this point,” given the uncertainty from the virus upending global economies and as volatility will continue for a while, he said.

Munro is looking for companies that will survive over the next three to five years, said Griffin, adding that large companies are the best placed to do so. Griffin continues to bet on Microsoft as more people use its Teams product and the shift to online schooling. Amazon and Alibaba will benefit as e-commerce accelerates post-crisis, and digital-payment companies will do well because people are going out less and cash is not seen as hygenic anymore, he said.

©2020 Bloomberg L.P.