Sandy Fleming, fund manager of the F&C Smaller Companies Investment Trust, is continuing to favour t...
Sandy Fleming, fund manager of the F&C Smaller Companies Investment Trust, is continuing to favour the UK and is optimistic about the future of smaller companies in all international markets.
Fleming has 49% of the trust in the UK, with the general view of cautious optimism for the sector and the belief that smaller companies are the beneficiaries of lower interest rates, of which there may be more cuts to come.
Fleming said: 'Going forward, after the excesses of the technology, media and telecom boom were corrected, it will gradually become more obvious which TMT companies will be the survivors. In the sector as a whole, valuations are looking reasonable at the moment.'
However, Fleming said that opportunities in smaller companies are not unique to the UK, as such he is increasing the trust's weighting in the US. In Europe and Japan he said the unwinding of cross shareholdings and family interests is offering some exciting opportunities.
In the US, Fleming said that while the outlook is confused and it will be some time before it becomes more clear, small companies are cyclical and benefit from low interest rates. He added that high operational gearing means that improved trading is quickly reflected in profits, and that relative earnings in the US are attractive.
While mindful of the risks in the Far East, Fleming said he is gradually increasing the trust's weighting in the area due to the fact that markets are fundamentally cheap, overall economic growth remains strong, and that growth in China will continue to drive the region.
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