By Pascal Dowling Andrew Paisley is to take over management of Dunedin Smaller Companies investment...
By Pascal Dowling
Andrew Paisley is to take over management of Dunedin Smaller Companies investment trust following the departure of Andy Bamford, who joins Aberforth in March.
Paisley, who has worked alongside Bamford at Edinburgh Fund Managers for two years, does not anticipate making any significant changes to the trust's portfolio in light of the management change.
He said: "My appointment as lead fund manager is unlikely to create any significant change in style as I have worked closely alongside Bamford for two years. I was backup manager and we share a style based largely on analysis of the fundamentals in a holding."
According to Paisley, this analysis means looking at the management and obtaining third party opinions of it, examining financial aspects of the company and the environment in which it operates and assessing the valuation it has been given.
He described the long-term view held by the smaller companies desk at Edinburgh as "quite bullish." He added: "We are positive growth for 2002 should pick up and reach a level of about 3.0% to 3.5%.
"Valuations are still low enough to make smaller companies a cheap buy. Corporate activity within the sector, such as buy outs and mergers, is quite widespread and while the short-term looks tricky, the long-term looks like a promising bet."
Paisley said the portfolio had been overweight in growth while under the command of Bamford and this might continue to be a feature.
According to Nick Greenwood, head of investment trusts at stockbrokers Christows, this caused problems for the trust during 2000. He said: "From what I understand, the trust had been doing very well in the last quarter of 1999 and the first of 2000, but had quite a tough time of it during the technology crisis, failing to bail out before the big crash.
"However, Edinburgh as a house seems keen on growth, so I expect Paisley will follow Bamford's footsteps fairly smoothly, without any real change to the management style."
Slowing worldwide economic conditions will present the first quarter challenge to smaller companies fund managers, according to Paisley. He said: "For the first quarter of this year at least I think everybody is fairly willing to accept that the global economic climate will continue to be a cool one.
"Although a soft landing is expected in the United States, the fact remains that gross domestic products worldwide are declining as economies slow, and as a result small-caps are a subdued sector."
According to Paisley the interest rate cuts are unlikely to have much effect on sentiment in the market because the majority have already adjusted for what they see as inevitable rate reductions. He said: "There will be no real boost to investor sentiment on the back of interest rate cuts over the next few months because not only are they already seen as a given thing, they are also seen as the Government's attempts to stimulate a cooling economy."
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