“Recovery funds are not yet at the point where they can be used to dampen down market volatility,” she said.
“There is a lot of volatility to come in the second half of 2015 and earnings expectations are going to weaken, particularly in the US and UK. We need to get further through this market fall before investors consider dipping into recovery funds.
“With a recovery fund an investor needs an outlook of five-years-plus, possibly 10, but we are not through the cycle of that disappointment and it needs time to unwind. Recovery funds will have their day again – you could invest today and be well out of it in 10 years’ time, but there is a lot of uncertainty ahead.”
Stand by your manager
With this in mind, Yousefian highlighted the importance of knowing your manager rather than being drawn in by the somewhat wide-ranging ‘recovery’ moniker.
He said. “When buying a fund it is crucial to understand what the manager’s style is rather than just looking at the label of ‘recovery’.
“It depends if the fund’s definition of ‘recovery’ is stocks that are undervalued against the market as a whole or out of favour relative to what they used to be. ‘Value’ and ‘recovery stocks can be two different things, but at the same time they can also be the same – it all comes down to the manager’s style and investment process.”
