The £500m Jupiter Growth fund undergoes revamp and moves from 100 to 70-80 holdings
Ian McVeigh, manager of Jupiter UK Growth, is bullish on the prospects for equities and has positioned the fund accordingly.
In April, McVeigh replaced Justin Seager as manager on the portfolio, following almost three years of poor performance on the UK Growth fund. Under Edward Bonham Carter, the fund was once the group's flagship. Seager is now running institutional funds at Jupiter.
McVeigh built up his name managing income funds at Schroders but departed a year ago to establish hedge fund company Parkway Capital with Nick Carn.
McVeigh joined Jupiter after disbanding his partnership with Carn, when it appeared the hedge fund was not goin to be successful. The pair quit before losing money.
Seven weeks into the job, McVeigh has turned over around 20% of the £500m UK Growth portfolio and takes full ownership for the way it now stands.
'I have reduced exposure to small and mid-cap holdings and bought into larger-cap stocks, particularly financials,' McVeigh said. 'I expect further upside in the market. This will be liquidity driven and in the large-cap arena.'
FTSE 100 stocks make up 72% of the fund, while 23% is invested in mid caps and 4%- 5% is in smaller companies. Following McVeigh's revamp, life assurance is the most overweight sector in the portfolio. UK Growth holds 8% in life assurance stocks, more than double the sector weighting.
'This is the first time in three years I have been buying life assurance companies,' McVeigh said. 'This reflects my view that valuations are extremely attractive. I have bought Legal & General, Aviva and Prudential.
'If there is even a vaguely reasonable outcome for the economy, which is obviously the question mark, equities are very cheap. I am looking for geared ways of playing that.
'The key driver of the market from here will be modest economic recovery. This could result in strong profits as companies' cost bases have been heavily cut in recent years.'
Other stocks that will perform well are those that suffered most during the bear market, McVeigh said. He has therefore built up an overweight exposure to media stocks, which have fallen 75% from their highs. Reuters is a key holding in this area.
Oil is the most underweight sector as stocks like BP will be left behind in a bull market, he added.
Structurally, the number of holdings has been reduced. McVeigh inherited a portfolio containing just over 100 stocks. This has since been reduced to around 90 and the aim is to bring that further back to 70-80 holdings.
Although traditionally an income manager, McVeigh is confident he can deliver the goods with a growth-focused portfolio.
'This is a general UK fund with a growth bias,' he said.
After taking a market view, McVeigh classes companies into the three categories: growth, recovery and value. BSkyB is an example of what he sees as a growth stock, while Cookson, Marks & Spencer and Gus fit within the value and recovery categories.
'Although you have to select good stocks, you also have to get the direction of the market right as this will lead you into the sectors and the individual stocks,' he said. 'I am not a top-down or bottom-up investor; you have to do to both.'
Naturally with his background, McVeigh will look closely at dividends, which he describes as a good measure of value.
'The attraction of dividends, given all the accounting scandals, is that investors have only been prepared to believe the cash they see,' he said. 'Obviously dividends are one way of seeing the cash but it also reflects managements' view on distribution of profits.'
McVeigh expects high-yielding equities will not continue to outperform, as in recent years.
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