James Henderson calls for UK economy rebalancing

Mr Henderson, manager of the £221m Lowland Investment Trust, said the UK economy must consume less and produce more to combat recessionary pressures in the market, at a conference of investment trust managers last week.

“We’ve got to be more the workshop of the world,” he said at the Henderson/Schroders conference on Tuesday (November 15).

“Good quality industrials will see a re-rating in the coming period.”

The manager said he was overweight industrials and basic materials, but he remained underweight in mining stocks, favouring exposure to speciality chemical companies which show “strong growth around the world”.

He added that prominence in the aerospace industry, driven by Rolls Royce, was an area which was resilient to slowing economic growth.

“The order books of Boeing and Airbus, which some of our UK companies are servicing, just keep growing,” he said. “It’s where the west has a big competitive advantage over the developing world.

“It is an area where it’s difficult to see the recession. When you look at order books you won’t see the recession at the moment.”

Mr Henderson warned the high street was a “miserably difficult place to be operating” as consumers continued to reduce spending.

The manager added that he was holding stocks for longer in response to significant volatility in the market.

He has reduced the average number of holdings in the portfolio from 130 stocks to roughly 100.

“I was buying things too early and selling things too early. The style is slightly changing, I’m now running a longer duration and selling in smaller amounts. I’m playing it cautiously,” he said.

The trust has outperformed its peer group over one and three years, delivering 80.3 per cent over the three year period to November 4, compared with an AIC UK Growth & Income sector average of 49.8 per cent, according to Morningstar.

In an interview with Investment Adviser published on October 31, Mr Henderson admitted that he found economics an “impossibly difficult thing”.

“I think the economics profession now is full of people that think economics is impossibly difficult,” he said.

“More and more of economic thinking would go towards understanding the motivation of companies and why they behave like they do rather than developing models as such.”