By Ruth Alexander Richard Buxton is stepping down from the Barings strategic policy group this mo...
By Ruth Alexander
Richard Buxton is stepping down from the Barings strategic policy group this month in order to concentrate more on the running of his UK Growth fund.
Buxton said this move has nothing to do with the fact that the fund has fallen to the fourth quartile in the UK All Companies sector over the past year, although he admits his promotion to head of the UK equity team in March last year may have had a marginal impact on the performance of the portfolio.
Buxton said he has now settled into his position as leader of the UK equities desk and is consequently very focused on the performance of the UK Growth fund.
He added: "It has been a horrible year. The fund has been 4% behind the index, over the rolling year to the end of April. This contrasts to our target for the fund, which is to outperform the index by 2% over rolling three year periods."
The £288m Baring UK Growth fund is ranked 243 out of 290 funds in the UK All Companies sector, over the year to 2 May 2001, on an offer to bid basis, having returned -12.6%.
Buxton said the poor performance of the fund over the past year can be attributed to the fact that the portfolio was still positioned for a positive stock market environment, on a strategic long-term view.
He said: "We mis-read the rate at which the US economy would decelerate. We also underestimated the degree of valuation compression in the market, although we still say that this is a cyclical, short-term phenomenon."
Buxton's outlook for the UK market is broadly positive. He said economic growth, profitability and liquidity levels are all still sound.
Buxton said the underweighting of defensive areas, as value stocks came to the fore in place of growth companies, also had a detrimental effect on the fund's 12-month performance.
On the other hand, Buxton is still sure that a number of stocks, which have seen their profits tumble over recent months, will recover in time. He continues to hold Reuters, WPP, Spirent and Amvescap, for example.
He has also bought back Capital Radio recently which he had sold at the end of last year when he saw the business was decelerating.
He said: "Although it is a little early in trading terms, it is a sound company and I would rather be in early, in this instance."
In order to turnaround the performance of the fund, Buxton has taken several measures since the beginning of this year.
At the end of 2000, Buxton reduced the size of many of the fund's active positions. Towards the end of last year, Spirent and WPP, for example, each made up 1.5% of the portfolio.
These weightings have now been reduced by 0.5%. Buxton has also altered his sector positions, reducing the fund's 3.5% exposure to IT hardware to 1.5%, for example.
Buxton said: "We have not moved aggressively into purely defensive areas but as interest rates decline, we've increased the fund's exposure to cyclical stocks, which are sensitive to such a reduction in base rates."
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