Old Mutual Global Investors is altering the Old Mutual UK Mid Cap fund run by Richard Watts to allow it to invest in medium sized companies that sit outside the FTSE 250 index.
In a letter to customers outlining the change to the prospectus of the £1.72bn fund, OMGI revealed they intend to reduce the 80 per cent limit for invested assets in medium sized companies to 75 per cent.
At the same time it is changing the fund’s definition of a medium-sized company “to allow investment in those UK-listed companies that are medium in size but are not members of the FTSE 250 index”.
The firm explained at the moment that holdings in companies that are not members of the FTSE 250 index are defined as ‘non benchmark’ holdings, which means any investments in UK medium-sized companies listed on AIM, for example, would fall under the definition of non-benchmark holdings.
Non-benchmark holdings within the fund can also include medium-sized companies which, as a result of strong performance, have become too large for the FTSE 250 and gained promotion to the FTSE 100 index.
It told customers: “Given the dynamic nature of the mid cap market, this can be a regular occurrence. It is important to clarify that the fund manager does not initiate new positions in FTSE 100 companies.”
Mr Watts added: “In early 2014 we made the decision to run bigger positions in our highest conviction ideas in the Old Mutual UK Mid Cap Fund. A consequence of that has been that if a number of our highest conviction ideas gained promotion to the FTSE 100 within a short period of time of each other, we may have been forced to sell stocks where we retain a high level of conviction, potentially to the detriment of clients in the fund. We have made the change to the prospectus to give us greater flexibility and for that reason only.”
