RSA Investments' focused UK portfolio is increasing the number of stocks it holds as it moves down t...
RSA Investments' focused UK portfolio is increasing the number of stocks it holds as it moves down the market cap scale.
RSA's £23.7m UK Prime has increased the number of stocks it holds to 37 from 31 over the past few weeks as more mid- and smaller-cap stocks are introduced into the portfolio.
Mike Felton, manager of the fund, is looking at liquid small-cap stocks and is moving more into the mid- and small-cap area in search of relative value.
He added that the more small and mid-caps there are in the portfolio, the larger the number of holdings will need to be. Liquidity restraints mean that small cap positions will be limited to around 1.5% of the portfolio rather than the 4% allowed for larger stocks.
Sectors that Felton is moving into include engineering, which he sees as benefiting from the expected economic upswing. Stocks he has bought include engineering group Senior and media business Informa.
UK Prime tends to hold between 20 and 40 stocks in its portfolio and Felton would not want the number of holdings to go above 40.
He said: 'We are believe there is a recovery in global growth underway prompted by the strong US recovery. You will get a movement in the market from consumer cyclicals to industrial cyclicals and then a move down the size scale from FTSE stocks to mid-caps and small-cap stocks. I believe we are staying reasonably ahead of the curve on this.'
Felton is also positive on the biotech sector where he sees some value, and has bought into stocks such as Celltech and Oxford Glycosciences.
The annual turnover on the portfolio is about 600% and Felton said he would not be looking for this figure to be much higher in the future.
Felton added: 'Our view on economic growth this year is in line with consensus ' our forecast for this year is for growth to be about 2%. Where we differ from the consensus is on interest rates.
'We have a more benign view on the need for interest rate rises by the end of the year. The consensus is for rates to be at 5% by the end of the year, while we believe they will be around 4.75%.'
Felton added that the consensus view on interest rates has come back from about 5.5% for the end of 2002 and that RSA Investments believes the market was being too pessimistic.
UK Prime has an A rating from Standard & Poor's and is £23.7m in size. The fund is ranked 111 out of 303 funds in the UK All Companies sector over the three months to 6 March 2002 on a fall of 0.2% on a bid-to-bid basis. This compares with a fall of 0.7% for the average fund in the sector on a bid-to-bid basis over the same time period.
Partner Insight: Continuing the Architas education series for clients.
What made financial headlines over the weekend?
290,000 already affected
Putting the tech into protection
Square Mile’s series of informal interviews