I have known Nils Taube, the London fund manager, for over fifty years. He has a unique long term track record since I first met him as a young partner in Kitcat and Aitken, a pre big bang firm of London stockbrokers. In the 1980s we were both members of one of Jacob Rothschild’s boards. Last April, Nils, who is in his late seventies, set up a new open ended investment company, S&W’s Taube Global Fund, which currently has £40 million under management. The Financial Times devotes most of Ellen Kelleher’s Fund Focus column of October 24th to the current policy of the Taube Global Fund. This is an opportunity to study the current strategy of an outstanding investor.
Nils Taube has always been particularly good at making money in difficult periods. He has a temperament which could be described as one of realistic optimism, and has never been a “gloom and doom” investor. This makes it more significant that he has structured Taube Global so that the fund is strongly defensive.
At present almost 15 per cent of the fund is in cash after the fall of the U.S. subprime lending market. It is heavily weighted in gold, with about 8 per cent of the fund in gold bullion and 12 per cent in gold shares. The FT quotes Nils Taube as saying “we regard gold as an anti-dollar cash position”. There is an exposure to Japan and to energy stocks, including BP and Shell and United Tar Sands, the Canadian tar sands group. In all, just over 30 per cent of the fund is invested in energy stocks, including oil and gas.
Nils Taube is at present suspicious of investment in banking and financial companies. He sets a high standard of liquidity for his investments so that he can trade in and out of them quickly. He is avoiding the shares of companies which rely on credit, “no matter how sound these investments may appear on paper”.
Obviously, this balance of the portfolio shows that Mr. Taube has, once again, got major trends right. He will not have lost money in financial shares. He will have benefited from the rise in oil and gas prices and the gold price. What I find significant, having known his investment response to the varying markets of over half a century, is that he still feels so cautious. If he is right now, then the oil price is likely to remain high, and may go much higher, the gold price is in a long term bull market, yet the credit market will remain volatile and uneasy. Nils Taube was getting his major calls right in the very difficult and inflationary decade of the 1970s. I suspect that he is again getting his calls right now.
for The Daily Reckoning Australia