By Leo Bland Schroder UK Enterprise is holding a quarter of its portfolio in the top 10 FTSE stocks,...
By Leo Bland
Schroder UK Enterprise is holding a quarter of its portfolio in the top 10 FTSE stocks, a position five times bigger than its exposure to the 10 largest listed companies when the fund was managed by Jim Cox.
The fund, which was taken over by Philip Hardy in October last year from Cox after he retired from Schroders, has 25% in the largest 10 stocks. This compares with 4-5% last autumn when the fund was under Cox's management and had a value bias. But Schroder UK Enterprise's current holding in the top 10 stocks in terms of size still represents an underweight position against the All-Share as these companies make up over 40% of the UK market.
Hardy said the fund now has a growth bias and its position in the largest 10 companies has been built up to reduce risk in the portfolio.
The increasing large cap bias is based around companies that Schroders is favouring as Schroder UK Enterprise only holds six out of the largest 10 companies in the UK stock market, including Cable & Wireless, and Vodafone. The fund also has positions in Glaxo Wellcome, SmithKline Beecham and AstraZeneca as part of its overweight bet in the pharmaceuticals sector as well as holding Lloyds TSB. Hardy does not hold HSBC or BT and also has a zero weighting in BP Amoco and Shell as part of an underweight sector weighting in oil stocks.
Hardy said: "I believe the oil price will fall from here and I would see BP Amoco and Shell underperforming in that environment. But I see good value in the exploration and production area and I have holdings in Lasmo and Enterprise Oil.
"Moving into the second half of the year, I want to look at companies with more visible and stable earnings. We are prepared to pay up for that going forward but we are not prepared to buy growth at any price. An example of this is our overweight position in pharmaceuticals, which has represented a big change in the fund as last autumn we were underweight. I started buying into the major pharmaceuticals companies at the beginning of March."
Other sector bets include an underweight position in banks as Hardy believes margins are under pressure and revenues are slowing. He adds the banks are also being hit by a significant increase in their costs from the need to boost IT investment.
The top 10 holdings in Schroder UK Enterprise in terms of active bets include Electrocomponents, Future Network, Rolls-Royce and Airtours. Other top 10 active bets are ARM, Kingfisher, Legal & General, Provident Financial, TeleWest and Lasmo.
Schroder UK Enterprise has an frA rating and is ranked 88 out of 299 funds in the UK All Companies sector over three months on a bid to bid basis on a fall of 0.2%. The £1.13bn unit trust is 177 out of 284 funds over one year, offer to bid, on a fall of 1.2% and is 193 out of 233 over three years on growth of 31.3%, also on an offer to bid basis.
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