Singer & Friedlander has restructured the portfolios of its UK Smaller Companies unit trust and the ...
Singer & Friedlander has restructured the portfolios of its UK Smaller Companies unit trust and the offshore Emerging Leaders Fund (Elf), cutting the weightings in both down to between 30 and 40 stocks.
Since taking over the operation of the two funds at the end of June this year, Simon Steele has rebuilt the portfolios, turning over 70% of their previous holdings.
The funds once held around 80 companies each. Since the restructuring each fund has a 90% portfolio weighting to their top 30 holdings.
Steele, who joined Singer & Friedlander from the investment team of Fuji-Lord Abbett's pooled pension fund, said the changes were taken with a three- to five-year view in mind.
Steele said: "I run a concentrated portfolio with equally weighted holdings of around 3% each. Some outperform others but I will typically let a stock go up to 5% before top slicing it. I try to avoid decisions at the sector level as sales drivers differ from company to company, particularly in the small cap market. "
An example of this is Mayflower, a stock held by both funds. Mayflower is a market leading bus manufacturer which Steele believes is well placed at a time when demand looks set to increase.
As a result of recent Government initiatives and privatisation at the operator level, Mayflower could potentially double or treble its business over the next couple of years, he said. In looking for stocks, Steele identifies best of breed companies with sustainable profits growth.
Qualitative characteristics of most of his holdings would be strong or dominant market position and a history of profit and market innovation.
He said: "I look for industries or sub-sectors of industries that are growing but maintain a rigid pricing structure. Often this means focusing on outsourcing areas where large organisations are looking to cut costs and improve business efficiency.
Look at telecoms, price erosion is happening rapidly in the traditional voice market but within the business to business data market, there is better price stability as contracts tend to be fixed for three to five years. Fibernet looks well placed to exploit trends in this market."
Both the Smaller Companies fund and Elf were restructured by Steele within a month of him taking over the portfolios in June.
The £34.5m Smaller Companies unit trust is ranked 14 out of 74 in the UK Smaller Companies sector over three months to 11 October. Over one year it is 66 out of 73 and over three years it is ranked 57 out of 67.
The Dublin-listed and sterling denominated Elf Oeic sub fund has £6.9m in assets. Elf and Smaller Companies were both run by Andrew Banks until the arrival of Steele. Banks is still head of UK smaller companies at Singer & Friedlander.
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