Investec Guinness Flight's long term growth approach to UK equities has been put aside in favour of ...
Investec Guinness Flight's long term growth approach to UK equities has been put aside in favour of defensive stocks to counteract the volatility in the market.
The group's £23.6m Blue Chip unit trust is overweight in more traditional areas of the market, such as oils, water companies and drinks stocks. When Jeremy Rigg took over the running of Blue Chip in January he intended to run overweight positions in technology and telecoms. Until then the fund had a much more value oriented outlook. Rigg's approach was tempered by the fact that tech stocks were overvalued and he expected a correction.
In February the portfolio bought into Allied Domecq at 275p, the current share price is around 360p. Rigg said: "The spirits market is in quite good shape over the short term. Emerging markets are recovering and many companies are cutting their tail brands and focusing on their premier products."
The rise in Allied Domecq contributed to the improvement in the unit trust's performance. Over one year the fund is in the bottom quartile of the Standard & Poor's UK All Companies sector on an offer to bid basis, ranked 262 out of 282. Over the three months to 3 May on a bid to bid basis the fund is ranked 69 out of 297 rising by 4.2% compared to an average rise of 2.3%.
Another stock which has helped improve the fund's performance is British Aerospace. Earlier in the year Rigg added to the fund's existing holding at 280p per share. The shares are now priced at 395p.
Rigg accepts that the low inflation environment means he will have to pay market premiums to hold growth stocks, but believes market volatility has not ended and the portfolio is best served by having exposure to defensive stocks.
He said: "The UK market is unsure how much further interest rates have to rise or whether in fact they have peaked."
On the upside, one advantage of the volatility in the market is that Investec has spotted some well priced growth stocks. Last month Rigg increased the portfolio's exposure to Vodafone.
He said: "The stock had performed pretty poorly due to speculation over the impact of the company buying a license from the Government but I believe the long term story is still there with the rise of data traffic on mobile handsets."
Since taking over the fund Rigg's portfolio turnover has been 30% and he expects a further 30% turnover by the end of the year. In addition he has reduced the number of stocks in the portfolio by 20 to 50. As well as running Blue Chip he also manages the £5.1m UK Opportunities unit trust. It is ranked five out of 297 over the three months to 3 May on a bid to bid basis. During the period it rose by 10%.
Rigg is assisted in managing the two funds by Nigel Dutson and Michael Rimmer. All three managers joined from Schroders at the beginning of January.
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