INSYNERGY Odey Fund Accumulation units

Our view on this Fund

The world economy has many issues to address, not least the European debt crisis, which is likely to rumble on despite yesterday's deal, and weak economic growth in the West. During the recent volatility stock markets fell sharply and shares slumped to levels last seen in early 2009, before staging a rebound.

Although Crispin Odey, manager of the INSYNERGY Odey Fund, recognises the threats, he does not believe stock markets are giving enough credit to the steps undertaken by many companies since the credit crunch. They were forced to slash costs, but have since generated a lot of cash, rebuilding their balance sheets and putting them in a strong position to weather any economic weaknesses ahead.

He is currently positive on certain banks. He believes Barclays has made great strides by improving mortgage margins, and building its capital base over the past two years. Yet he believes the company's current valuation implies its assets are only worth roughly half of their balance sheet value.

Another area of focus for the portfolio is Germany. The country has enjoyed a weaker currency than would have been the case had the Deutschmark still been in circulation. Car manufacturers such as BMW and Volkswagen have benefited, yet their share prices also fell in volatile markets despite increased global sales.

The biggest position in the portfolio is British Sky Broadcasting (BSkyB). The well-publicised phone hacking scandal led News Corp to withdraw its bid for BSkyB, hurting the share price in the short term. Crispin Odey regards this as a long-term positive, because the News Corp bid substantially undervalued BSkyB and the cash the business will be generating in two years' time. BSkyB has upgraded its technology, improved margins and has scope to cut costs; aiming to increase its dominance of the market and further reduce its costs. It could also benefit from rising consumer demand, arising from the impending switch from analogue to digital. Furthermore, the company recently announced a 32% rise in profits for the 3 months to 30 September 2011, partly on the back of a strong increase in broadband subscribers.

Crispin Odey searches for companies he feels have been entirely misunderstood by the broader market and where there is evidence of a catalyst for recovery. This leads him to look two or three years ahead to assess how companies might be faring. He will back his convictions with large stock positions, but this increases risk and remember like all investments this fund can fall in value as well as rise. He can also take large cash positions if he sees fit and has the flexibility to invest in derivatives to enhance returns, all of which means this fund should be seen as higher risk.

There will almost certainly be more stock market volatility to come, but we hold Crispin Odey in high regard and believe over the long term investors could be well rewarded by his patient approach. We are happy to retain this fund on our Wealth 150 list of favourite funds in each sector. Please note you are not normally entitled to compensation through the UK Financial Services Compensation Scheme for offshore funds.

28-10-2011