Recession seems ‘inevitable' until the Bank of England cuts interest rates, according to Axa Framlington.
Jamie Hooper, fund manager of the Axa Framlington UK Growth fund says: "We’ve moved through denial in the last few months and then flirted with fear, desperation and panic.
"The point of opportunity is near the bottom of the curve close to despondency. It still remains a bear market rally,” he adds.
Hooper believes there could be a 20% cumulative earnings decline over the next two to three years. He has consequently adopted a cautious portfolio with a preference for stocks with more consistent and visible earnings growth. Strong balance sheets are an important differentiator, he adds.
“Sector wise, we’re overweight in support services, aerospace and defence, plus life companies. We’re neutral in energy and materials. The portfolio’s more balanced than it has been over the last year.”
The fund has a large cap bias with 50-70% FTSE 100 stocks and “is about conviction, not hugging the index,” says Hooper. He believes the lifecycle of returns is more important than sector categories.
His portfolio holds a strategic core of long-term winners accounting for about 70%-100% with the remainder being ‘tactical opportunities’; stocks which make money in the short-term but have uncertain medium-term fundamentals.
According to Rob Bailey, head of UK retail sales, since Hooper took over in December 2006, to the end of July this year, fund returns were -3.5% relative to -12.7%, the IMA UK All Companies sector average.IFAonline
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