Savings chief gears up

The boss of one of Britain's most popular core investments for smaller savers, the giant £2.6 billion Foreign & Colonial Investment Trust, has today revealed that he has steadily been increasing borrowings in order to scoop up cheap shares in the wake of recent market turmoil.

Jeremy Tigue, manager of the Foreign & Colonial Investment Trust, has increased the trust's gearing from just 5% in June, when share prices were at a high, to 8% in August. He expects gearing to get to around 10% this month.

"Our cautiousness earlier in the summer clearly paid off. We slashed gearing to a seven year low and closed out our long-standing, and successful strategy, of borrowing in Japanese Yen to finance higher returning investments elsewhere," explained Tigue.

"My view now is that the shake-out in markets is throwing up some real opportunities for long-term investors and therefore it is right to progressively add new positions to the portfolio."

However, this time round Foreign & Colonial Investment Trust is borrowing in US dollars rather than Japanese Yen, based on Tigue's assessment that the US Federal Reserve will reduce interest rates to address the problems in the credit markets which stem from defaults on US mortgages.

"Last week's very disappointing US employment data has provided further impetus for the Fed to cut rates. Despite widespread bearishness and paralysis in credit markets, it is my belief that the liquidity crunch will unwind over the coming months," he said.

Tigue still favours emerging markets for the long term and remains cautious about the US. He warns private investors not to "pile in relentlessly" but to consider a similar steady approach to re-entering the market, for example, through regular savings schemes.