Alec Cutler, portfolio manager of the Orbis Global Balanced Strategy, discusses why there is value in the UK market, the case for defence stocks, opportunities in the energy transition and a review of the fund’s performance, at the same time as looking at investment opportunities in Japan and Korea.

At a media event in London this week, Alec Cutler of Orbis Investments underlined the case for investing in UK, Japanese and Korean firms, saying that they are undervalued markets.

Cutler is heavily overweight in the UK, Japanese and Korean markets, slightly overweight in Europe and very underweight in the US. “We favour UK mid-small caps," he added.  He is not alone in his views. Graham Ashby, UK all cap fund manager at investment manager Schroders, also believes now could be a good time for investors to increase their exposure to UK shares. Frédérique Carrier at RBC Wealth Management thinks that there are opportunities in 2024, despite the subdued economy, and recommends a market weight position in UK equities. See more commentary here. 

"We’re also still massively underweight in fixed income, with no investments in the US, Europe, Japan or the UK,” Cutler told the media briefing.

“Japanese banks have been fantastic for us...we have now rotated out of Japanese banks into Korean ones,” he added. “We are also invested in Japan’s Nintendo.” 

Orbis isn't alone in favouring Japan and thinking that as a result of corporate governance reforms and other measures, the Asian country deserves more investor attention. See more commentary here on Japan. 

Cutler highlighted opportunities in the energy transition, notably in upgrading the infrastructure. He also drew attention to the role of cables, with 90 per cent of cable manufacturers located in Europe. He invests in the cable manufacturer the Prysmian Group as well as UK-based Drax, a renewable energy company engaged in renewable power generation and the production of biomass.

Cutler also emphasised the benefits of investing in gold, which acts as an inflation hedge; he is 6 per cent invested in gold and 4 per cent in gold mining, including copper. The latest 2024 first quarter report by the World Gold Council also reveals that total global gold demand was up 3 per cent year-on-year reaching 1,238 tonnes, marking the strongest first quarter since 2016. See more commentary here about gold. 

Orbis Global Balanced Strategy
Cutler manages the Orbis Global Balanced Strategy which is a top quartile performer across multiple time periods in its sector.

The fund seeks to balance investment returns and the risk of loss using a diversified global portfolio. To do this, it primarily invests in shares of publicly-listed companies and bonds issued by companies and governments located anywhere in the world. It can also indirectly invest in commodities. It targets outperformance of the returns of its benchmark, 60 per cent MSCI World Index with net dividends reinvested and 40 per cent JP Morgan Global Government Bond Index (hedged into sterling).

Holdings include iShares Physical Gold, South Korea-based Samsung Electronics, Taiwan Semiconductors, Japanese-based Mitsubishi Heavy Industries, UK-based Drax Group, cable manufacturer the Prysmian Group, and Siemens Energy focused on wind turbines, energy storage and electrification of the industry.