By Leo Bland Schroder UK Enterprise is seeing a bounce in its short-term performance on the back of ...
By Leo Bland
Schroder UK Enterprise is seeing a bounce in its short-term performance on the back of the market's more optimistic view of UK economic growth.
The unit trust has seen a sustained period of underperformance in recent times which is largely down to an overweight position in mid and small cap stocks. These were badly affected last year with the markets taking the view that the UK was heading for recession. With current consensus for a soft landing for the UK economy the outlook and the recent performance of small to mid-caps has picked up, boosting the short-term figures for Schroder UK Enterprise.
The fund, which has an frAA rating from Standard & Poor's Micropal, is ranked 117 out of 131 funds over three years in the UK Equity Growth sector, on growth of 26.2%. Over one year it is 145 out of 151 on a fall of 14% but over three months the fund is 47 out of 159 on growth of 10.1%.
Jim Cox, who runs Schroder UK Enterprise and is a director of Schroder Investment Management, said the fund has benefited from a recent change in the leadership of the UK market. He is uncertain as to whether this change in the market in the last quarter is set to develop into a longer-term trend.
He said: "We have had a bit of a change in the leadership of the market with the smaller companies outperforming the larger companies recently. The first reason for that is that the economic forecasts at the end of last year were too pessimistic. We are now heading for a soft landing rather than a bumpy one. That has lead to a rerating of small and mid-cap stocks. The second factor is that there has been a lot of money coming at the small and mid-cap sector recently, especially in the form of bids for companies."
Recent deals which have benefited Schroder UK Enterprise have included AXA's offer for Guardian Royal Exchange. Guardian has seen its shares rise by 10.7% in the period between 30 December 1998 and 9 April 1999.
Cox currently holds 47 stocks in the fund but is looking to add to this to take the number of holdings to around 50.
Schroder UK Enterprise is heavily overweight general industrials as at 28 February with a 25.64% exposure. It is also slightly overweight financials with a 25.71% holding. The portfolio's underweight positions include resources with 7.12%, consumer goods with 5.94%, utilities with 1.39% and investment trusts with 0.1%. Schroder UK Enterprise is around the neutral mark in the services sector with a 32.57% holding and it also has 1.53% in liquid assets.
The top 10 holdings include 4.98% in Cable & Wireless, 4.55% in National Westminster, 4.5% in Vodafone and 4.37% in Slough Estates. The other top 10 holdings are 4.27% in Guardian, 3.74% in Asda Group, 3.63% in Rolls Royce, 3.36% in Tesco, 3.14% in Lloyds TSB and 3.13% in United News & Media.
Cox was replaced as fund manager of the Schroder UK Growth investment trust earlier this year after the trust's board decided it wanted to change the investment process on the fund.
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