By Adam Lewis Richard Peirson, manager of the Framlington Financial unit trust, is increasing his...
By Adam Lewis
Richard Peirson, manager of the Framlington Financial unit trust, is increasing his weighting in Japan to the benchmark 9% as he believes long-term there is a massive amount of cash on deposit which savers will transfer to the markets.
Peirson said that in the 1990s Japanese savers had no confidence in their brokers and as such hoarded their savings in deposits rather than putting them in long-term equity products. He said: "We are now seeing signs of Anglo Saxon style financial restructuring, with bad loans being written off and cost cutting taking place. Inflation is being targeted, with monetary policy being fixed to the exchange rate. This will stimulate the economy to try and eradicate deflation.
"Effectively they are printing money to ensure getting rid off the deflationary background and in doing so are bringing back consumption."
Peirson said that for most of the 1990s he has had little exposure to the Japanese market and that although he has only moved up to the benchmark weighting, he suspects he has more invested than many of his competitors.
He believes that for financial services globally there is genuine volume growth and that the sector will marginally outperform the market for long-term growth for savers.
In the US, he is underweight in banks this year but overweight in general insurance, believing the sector is at the beginning of a four-year upturn in the cycle.
In the UK, where he has 25% of the fund allocated, his focus is on mid-cap companies, concentrating more on the smaller niche companies than the big banks.
In Europe, where 30% of the fund is invested, the focus is on the bigger stocks as European financials are at an earlier stage of development and investors in Europe have more confidence in their own banks.
Framlington's view as a whole is that there will be a soft landing in the US and a serious recession should be avoided. Peirson said: "The Fed will do whatever is necessary. It has the firepower to cut and cut and cut interest rates if necessary."
In Europe, Peirson believes there is no inflationary threat and although global growth is going to slow this year, the economy is in good shape.
He said: "The financial health of the consumer is not in bad shape, particularly in the UK. Sentiment may get worse but the fundamentals in the financials look good."
Framlington Financial, which is featuring a 1% discount off its initial charge until 5 April, is ranked 18 out of 28 funds in the Specialist sector, based on its offer to bid returns of 10.6% for the three years to 21 March.
Over one year, the fund is one of the few in the sector to have achieved positive results at 3.4%, ranking it six out of 43 funds. The average sector return over the year to 21 March was -33.6%.
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress