Fund of the week: markets are heading for a fall

Asset manager Crispin Longden's fund has returned 31.4% since March. But he remains sceptical about the market rally.

It'd be easy to get carried away in the European equity rally, with stocks up 30% since March. But Crispin Longden is sceptical. His fund, the F&C European Assets Trust (LSE: EAT), has returned 31.4% since March, after big gains for TiGenix, a Belgian-based biotech stock, and Irish software group Norkom. But he's more cautious than ever about the rally 15% of the mid-cap focused fund is now in cash, waiting for a pull-back that may, says the St Andrews-educated fund manager, come sooner rather than later.

The current rally has been led by the same sectors that powered the market to its earlier highs, only to fall back because they were too pricey. Second, it has occurred on very low trading volumes, "often associated with a temporary blip in a longer bear market rather than a genuine recovery." After rallying 39%, small caps are factoring in a "sharper and more rapid improvement in profitability and balance-sheet health than the current economic conditions or immediate outlook warrant".

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Tigenix NV4.4
Indra Sistemas SA4.2
Norkom Group PLC3.9
Digital Multimedia Technologies SPA3.8
Andritz AG3.8
Goldbach Media AG3.7
Acino Holdings AG3.4
Grafton Group3.3
Partners Group Holding3.2
Hera SPA3.0
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