Miton’s US managers have boosted their exposure to financial stocks in preparation for a US interest rate rise.
Nick Ford and Hugh Grieves, who run the group’s £70m US Opportunities fund, said they had increased one of their financial holdings and added three more.
If interest rates go up, banks and financial institutions can benefit by encouraging depositors and then lending the money out at higher rates. Financial companies are also viewed as economically sensitive, meaning they perform better when economies are stronger.
Mr Ford said: “In light of the encouraging economic data in the US, and in particular the possibility that interest rate rises may be on the cards sooner than expected, we have increased our holding in Charles Schwab, which will be a big beneficiary of rate rises as it will be able to start earning money on its huge customer deposit base.
“In addition, we bought positions in State Street Corporation and two regional banks, City National and Wintrust Financial.”
Mr Ford said State Street offered custodian services, including fund accounting and administration, as well as having a “competitive lead” in asset servicing for large investment management firms.
“Low interest rates have depressed revenue from its securities portfolio and we see room for the company’s valuation to expand as investors anticipate the Federal Reserve tightening monetary policy,” he added.
He said City National Bank was “well positioned” to benefit from California’s improving economy and that Wintrust was a premier growth-orientated community bank in Chicago and Wisconsin.
Elsewhere, Mr Ford said he had been selling down exposure to blue-chip stocks in favour of smaller businesses. The manager said he sold Kraft Foods and prescription management company Express Scripts and reduced Wal-Mart Stores. “These are relatively defensive names we would expect to lag a small cap rally,” he said.
