vivian bazalgette's m&g capital fund will take a large cap, tmt and consumer cyclicals bias
Vivian Bazalgette has repositioned the M&G Capital fund for out and out growth favouring large-cap stocks, the technology, media and telecommunications sectors and consumer cyclicals.
Bazalgette, who is also M&G's chief investment officer, took over the running of the fund on 24 September from Tim Daniels, following a lengthy period of poor performance. The £142m fund had languished at the bottom of the performance tables for the All Companies sector.
In the year to 16 January 2002, the fund was ranked 273 out of 285 funds, on an offer to bid basis, posting a negative return of 27%.
The fund's performance has since picked up considerably, although Bazalgette admits an upturn in markets has given him a favourable wind at his back. In the three month period to 16 January 2002, the fund rose to 77 in the performance tables, on a bid to bid basis, returning a positive figure of 5.2%.
Bazalgette said: 'I was quite fortunate in that I took over the fund on 24 September, which was the day on which the markets started to turn. My view is that there will be a strong global economic recovery during the course of this year and I started to position the fund accordingly. This has meant investing primarily in large-cap multi-national stocks which will do well in this environment.'
Although he is confident a global recovery will take place, Bazalgette believes that in comparison the performance of the UK economy will be less spectacular. This has led him to steer clear of the mid-cap and smaller companies areas of the market, much of which appears fully valued to Bazalgette.
'As earnings forecasts start to come through later in the year, the market will start to head up,' he said. 'The determining factor behind my stock selections has therefore been to look for those companies with a higher degree of beta, that is companies whose operating margins are quite volatile.'
A large number of technology, media and telecoms companies currently fall into this category, he added. Recent buys have included Sage, Xansa and Vodaphone, in which he is currently overweight.
One exception to his bullish view on this portion of the market is the telecommunication hardware sector, which he feels is oversupplied.
His other significant change has been to increase the portfolio's exposure to the consumer cyclical sector, in particular retailers, which he feels will continue their positive reaction to low interest rates.
When Bazalgette took over the fund, he found that although it did have considerable exposure to tech, media and telecoms, much of it was in the telecommunication hardware sector which he has now sold down. Holdings in more defensive companies such as AstraZeneca and Lattice were also sold off, while others such as beverage giant Diageo were lightened. The fund is running 47 stocks, which Bazalgette sees as the optimum number.
The portfolio, he said, is administered on the basis of his prevailing top-down view, with selection based on whether potential purchases had a business model which would succeed in that economic environment, as well as possessing a valuation that offered attractive upside potential.
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