Merlon performance dented by coronavirus
Merlon Capital Partners has become the latest firm to warn on its fund performance in light of coronavirus.
Last week, Investors Mutual Ltd warned it expected February would be a negative month due to holdings such as Event and Crown Resorts which would be affected by the virus.
Merlon said it forecast its $577 million Australian Share Income fund to have lost 6.9% during February when it reported its monthly results next week.
This was due to its underexposure to very large-cap stocks as well as positions in Southern Cross Media and IOOF. However, the negative contributors were offset by exposure to QBE Insurance, Viva Energy and Caltex.
Looking ahead, Merlon said, it hoped it would be able to take advantage of the opportunity presented by coronavirus to adding exposure to those companies which were trading at a discount.
In an update, the firm said: “We are long-term investors and our core view is that COVID-19 will not change their shape of the global economy or the aggregate level of our equity markets on a three to five-year view.
“As such, we are looking to add exposure to companies whose share prices are weak due to current fears and where we have confidence balance sheets and business models are sufficiently strong to trade through the turbulence.
“We would expect our focus on free cashflow and our contrarian approach to preserve capital in an extended downturn.”
Global markets have been significantly affected by the coronavirus, with markets in the US particularly suffering and reporting their worst week of performance since the Global Financial Crisis in 2008 last week.
Performance of Merlon Australian Share Income fund v ASX 200 over one year to 28 February, 2020
AUTHOR
Laura Dew
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