By Jenne Mannion Global Asset Management (GAM) has trimmed back exposure to telecoms and technology ...
By Jenne Mannion
Global Asset Management (GAM) has trimmed back exposure to telecoms and technology in its £11.1m European Growth Fund, while taking advantage of opportunities to capitalise on oversold old economy stocks.
The areas where fund manager John Bennett has recycled profits into include food manufacturing and healthcare.
Bennett is also looking for value opportunities to reinvest the 10% cash weighting, which is higher than the usual level, in the UK authorised sub fund of GAM's Oeic.
Bennett said the reduction in small- and mid-cap technology and telecoms was taken as a defensive measure and helped to cushion the portfolio against the correction in technology, media and telecoms stocks earlier this year.
He said: "We are now underweight telecoms, based on excessive valuations in the market. Our fundamental concern is the risk of high traffic with low profits, putting downward pressure on margins."
The GAM European Growth portfolio is ranked fourth out of 13 funds, bid to bid over three months to 17 May in the Europe including UK sector. It is fourth out of 11 over one year, offer to bid and is the third out of six funds over three years.
Bennett has also trimmed back a long-term overweight exposure to banks, back to an underweight level. This position is based on expectations that inflation, which is negative for banks, is set to increase.
He said: "Within our exposure to banks we hold some of the specialist banks, which offer more of an asset gathering rather than banking story. Within the now underweight exposure to technology, the emphasis is on enabling companies, rather than the dot.coms."
Since the end of February Bennett has been unwinding his technology exposure prior to the correction in the market.
He said: "I started putting the money into old economy stocks in the UK. This is because I believe we saw private and institutional investors behaving indiscriminately in their buying of technology stocks in the first quarter. This resulted in the dumping of some quality stocks, which were beaten down to distressed levels.
"Look at some of the companies that came out of the FTSE - AB Foods, Wolseley, Scottish & Newcastle. I won't pretend that these are high growth businesses but they are growing businesses. These were however put down to levels that indicated these companies were going into the biggest recession we've ever seen. That was wrong. At a time we were looking to wind down our biggest themes these looked very attractive."
The fund blends industry themes and stock section while country and sector allocations are of secondary importance compared with identifying attractive investment opportunities. There are about 90 stocks in the portfolio at the moment, which is at the top of its spectrum. Bennett manages a total of $230m in a range of authorised and offshore funds and institutional mandates.
The top five holdings are Ericsson with a 3.5% portfolio weighting, BP Amoco at 3.2%, Nokia at 3.1%, Vodafone at 2.8% and Royal Dutch Petroleum at 2.2%.
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