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Brook cashed up for grim times

Brook Asset Management has been heavy on the cash over the last few months but could allocate even more to the sector, according to director, Paul Glass.

Thursday, July 3rd 2008, 5:40AM

by David Chaplin

Glass said yesterday cash has reached 55% in its Alpha Fund and over 30% in the firm's Tasman Fund with attractive equity investments few and far between.

"The cash levels are high but they might go even higher if we can't find opportunities," he said.

However, Glass said Brook's high allocation to cash in the funds was not the main driver of their outperformance over the last year.

Over the three and 12-month periods to the end of May this year, both the Alpha and Tasman funds have significantly outperformed their respective benchmarks.

"Strangely enough most of that outperformance came from equities rather than cash - we've been very careful to avoid the downside risk," Glass said. "This is the kind of environment we thrive in and even enjoy it in some ways."

Despite the funds' good performances, in its presentation to analysts and media yesterday, Brook predicted a generally bleak outlook for the world's economy over the next year at least.

Glass said the failing housing market across the developed world represented the "greatest concern to us", with inflation a close second.

He said New Zealand was "already in recession".

"The question is really how deep will the recession be," Glass said.

Brook's call was that the New Zealand recessions will "not be particularly deep" but it could persist for a long time. According to Glass, high dairy prices and the good state of both public and private sector balance sheets will provide some insulation to the country, but the downturn will hurt households.

"Households will probably feel it as a deep recession even if the statistics show that it is not," he said.

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