By Jenne Mannion The £67.5m Rathbones UK Smaller Companies fund is taking profits from its strong pe...
By Jenne Mannion
The £67.5m Rathbones UK Smaller Companies fund is taking profits from its strong performance in technology holdings and recycling these into the property and retail sectors.
The increased exposure in these areas moves the unit trust from a heavily underweight position in these sectors toward neutral, according to Roger Whiteoak, its manager since January 1996.
The portfolio's most overweight position is now in technology, although Whiteoak said that at 24% this is less of a position than many funds in the UK smaller companies peer group. Although confident on technology companies, he prefers to maintain a balance of sectors to spread risk.
Property offers good value and is becoming increasingly interesting, Whiteoak said and he noted some companies are trading on a discount of as much as 50% to assets.
The retail sector is on low valuations and Whiteoak believes its exposure to a buoyant domestic economy is a positive, although he sees strong competition and deflationary pressures as potential negatives. The frAA rated fund is slightly overweight in biotech, building and construction.
Whiteoak said: "The position on biotech is based on growth in the sector and the fact that this market requires intellectual property, therefore it is hard for competitors to enter the market. The position on building and construction is based on strong domestic earnings and relatively full employment in the UK, and the fact this sector is not susceptible to deflation."
The portfolio has also been skewed away from businesses vulnerable to import competition and has an aggressive underweighting in textiles, food manufacturing, paper and packaging, and low value engineering.
The fund usually has 100 holdings to diversify risk, rarely with more than 2% portfolio exposure to an individual company but this has recently risen to 130 stocks. Whiteoak said this was due to the broad range of opportunities among smaller companies at present.
Rathbones UK Smallers, which invests in AIM stocks as well as those with a full listing on the London Stock Exchange, aims to avoid over-reliance on any single investment style.
Whiteoak said: "Although the market will continue to be technology driven, there is going to be a lot of corporate activity across the board. We are also coming toward the end of a rising interest rate cycle. At the end of the day there are great investment opportunities in the sector. I expect there will be another rally after the summer."
Over three months the fund is ranked 21 out of 75 funds, bid to bid with net income reinvested. On an offer to bid basis, with net income reinvested it is ranked 20 out of 74 funds and over three years it is ranked 14 of 68 funds.
The top five holdings in the fund are Staffware at 1.64%, Science Systems at 1.6%, Whatman at 1.52%, Cannons Group at 1.46% and Alphameric at 1.44%.
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