UBS UK Smaller Companies fund manager Frank Manduca has invested around two-thirds of his portfolio ...
UBS UK Smaller Companies fund manager Frank Manduca has invested around two-thirds of his portfolio in long-term positions as he is unconvinced the market will continue to rise.
When the fund was launched in March, Manduca said he planned to hold half the portfolio in long-term analyst-led ideas, with the other half in short-term stock picks created by market anomalies.
But while the fund has done well out of the post-Iraq equities bounce, Manduca is happy to lock in the gains and reduce the short-term trading bias of the fund for the time being.
'After such a big rise, I am concerned the market might fall back a bit, so I wanted to have companies that I am happy to hold for the long term, companies that if there is a correction will not fall by 15%,' he said.
The fund has gained 31.9% bid to bid over the three months to 14 July, against a UK Smaller Companies sector average of 25.5%, to rank at four in a field of 72.
'I have been keen to make sure I don't hand back gains. If at the end of the year I am up 39%, I will be happy,' he said.
Accordingly, Manduca has sought cash generative, well-managed companies that pay dividends and are trading below what he considers fair value.
However, he is still keen to exploit a growing trend towards merger and acquisition activity, fuelled by venture capital trusts holding some £9bn ready to invest.
The short-term part of the portfolio has turnover of up to 400% per year, while the long-term segment is only around 40%, Manduca said.
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