Timothy Malloy, comanager of the top-ranked John Hancock Global Opportunities Fund, has been paring bets on commodity-related stocks that helped the fund beat all rivals during the last year.
Malloy cut stakes in the last two months in energy stocks, such as British Energy Group P.L.C., to 18 percent from about 29 percent a year earlier, after oil prices surged. He trimmed holdings in materials companies to 25 percent from 30 percent, and raised stakes in financial companies, including the Charles Schwab Corp., as their shares plunged.
"We're looking to take some profits in the sectors that have done extremely well and reinvest those profits in areas that we've been avoiding for several years, like financials," Malloy, 38, said in an interview from his office in Boston, where he helps oversee $4.5 billion in value-oriented strategies.
The $104 million Global Opportunities Fund advanced 20 percent in the yearlong period that ended Wednesday, the most of 144 funds that invest in stocks all over the world, according to data compiled by Morningstar Inc., of Chicago.
The fund has Morningstar's highest rating of five stars. It has a three-year Sharpe ratio of 1.25, compared with 0.80 for competing funds, Morningstar data show. A higher Sharpe ratio means better risk-adjusted returns.
This year, the fund has advanced 5.3 percent to rank second, the data show. It also has seen the departure of comanager Timothy Keefe, who left April 1.
The Morgan Stanley Capital International EAFE Index of 1,195 stocks in developed countries declined 3.3 percent this year through Wednesday, including reinvested dividends, as shares retreated on fears of a global slowdown. During the last year, the index has fallen 1.7 percent, compared with the 6.5 percent decline in the U.S. benchmark Standard & Poor's 500 index.
Malloy and his comanagers are cutting back as energy companies in the Standard & Poor's 500 are outperforming the broader market for the ninth straight year on surging demand for oil. Crude touched a record $135.09 a barrel in New York on May 22 and traded at $131.03 a barrel Wednesday on the New York Mercantile Exchange.
With Keefe, the Global Opportunities Fund had a commodity-heavy slant since its inception in 2005. Keefe, 45, who rejoined John Hancock Funds in 2004 after a four-year stint at a hedge fund run by Thomas Weisel Partners L.L.C., left to join another investment firm.
Malloy, who worked with Keefe at Thomas Weisel, has been on the Global Opportunities Fund since it started. Comanager Christopher Arbuthnot has worked on the fund since 2006, while Roger Hamilton, who had been with John Hancock since 1994, joined the fund in April. The fund is owned by MFC Global Investment Management Ltd., a unit of Toronto-based Manulife Financial Corp. Manulife acquired John Hancock Financial Services Inc. in 2004.
"How they redeploy the assets is going to be the main test for this new team, which I view as still unproven," Michael Herbst, an analyst with Morningstar, said in an interview. "Having seen previous commodity-related cycles as a portfolio manager, Tim Keefe's departure is material in this case. No one has his level of experience."
The Global Opportunities Fund has 34 percent of its assets in the United States and 21 percent each in Brazil and Canada. The remainder is distributed in the United Kingdom, Germany, France and South Africa.
Malloy sold British Energy, among the fund's top five positions last year, after the shares doubled during the last two years. This year, the shares are up 32 percent on takeover proposals from rivals.
The fund's top holding as of April 30 was Agrenco Ltd., the Bermuda agricultural and biofuels company. Agrenco, which offered shares on the Sao Paulo stock exchange in October, has plunged 54 percent this year, along with shares of other agricultural companies. Malloy said he had taken advantage of the decline to add to his stake, bringing Agrenco holdings to 6.8 percent of the portfolio.
The fund's second-largest holding is Toronto's Franco-Nevada Corp., a mining and energy-royalty company whose shares have risen 34 percent this year. Franco-Nevada accounts for 5.6 percent of the fund's assets. The shares have advanced 33 percent since the company's initial public offering in November.
American Oriental Bioengineering Inc., which is based in Harbin, China, and makes plant-based medicines and diet supplements, is the fund's third-biggest holding, representing 5.3 percent of assets. The shares have risen 5.5 percent this year.
Malloy has tripled his stakes in financial shares to 7.4 percent in the last year by investing in Schwab, a San Francisco discount broker, and Wright Express Corp., an auto-fleet-billing company in Portland, Maine.
Schwab's shares have tumbled 13 percent this year, while those of Wright have fallen 12 percent.
"There has been a huge sell-off in financials, and companies are trading at valuations not seen for six to seven years," Malloy said.
Timothy Malloy, Christopher Arbuthnot, Roger Hamilton.
Up 5.3 percent.
Agrenco Ltd., American Oriental Bioengineering Inc.