Invesco Perpetual UK manager Neil Woodford sees the decline in global equity markets since May as a ...
Invesco Perpetual UK manager Neil Woodford sees the decline in global equity markets since May as a much needed correction in investors' risk appetite.
Woodford, whose Income and High Income portfolios underperformed in the first quarter on the back of low exposure to mining and oil stocks, now runs some £12bn in assets for the group.
He said: "As there is nothing new in terms of economic horizon, inflation, interest rates, credit quality or corporate performance to trigger this reappraisal of risk, we believe global equity markets are waking up to the fact the world is not quite as benign as previously thought.
"The expansion in risk appetite witnessed in the first four months of 2006, best characterised by strong performance of a rather narrow band of commodity or resource-related stocks and anything geared into either cyclicality or a potential takeover bid, is what has been correcting recently."
As for the UK economy, he expects growth to slow, as in the US and across the world.
"This will inevitably have an impact on corporate profitability, which in turn may well have an impact upon the rating of stocks in the market, culminating in a reappraisal of the best place to invest. Such conditions ought to be beneficial for the Income and High Income funds, which are well positioned to benefit from this environment," he said.
Overall, Woodford said FTSE 100 exposure in the funds has increased in recent years as he has found the most undervalued stocks at the large end of the blue-chip range.
"At the same time, the strong performance of small and mid-caps has driven valuations up to a level where I believe there is less attraction in those areas of the market, particularly as the economic environment is getting more difficult," he added.
"We are still overweight in mid caps because we continue to find some interesting opportunities there but it is fair to say that some of the most interesting, undervalued situations at present are in the FTSE 100." |
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