The UK banking space is slowly recovering and continues to be a top holding, according to Steve Davies, fund manager of the Jupiter UK Growth fund. Mr Davies said the fund has positions in three of the UK’s largest banks: Lloyds (7.5 per cent), Barclays (7.1 per cent) and RBS (4.1 per cent).
He added he has close to £80m of “firepower” at the moment. “It is a nice position to be in, in these market conditions,” he said.
Pointing to the UK banking sector improving and going through a recovery mode, Mr Davies said he is still positive on buying Barclays and RBS shares below book value and expects sharp improvement in the underlying profitability of banks.
He added the UK economy is stronger and Jupiter have been positive on the UK since 2012.
Apart from the UK, Mr Davies said emerging markets are still favourable despite volatility. The fund is constantly looking for opportunities in the emerging market equity space in order to gain exposure outside the FTSE. Some of the stocks included in the fund’s portfolio from the growing trend in emerging markets include Apple, Manchester United, Adidas, Reebok and BMW.
Touching on the issue of a Fed rate hike, Mr Davies said rising interest rates are not a death knell for equities and the average performance one year after the Fed rate rise from 1971 to June 2004 was 12.9 per cent, according to the MSCI World before and after the rate rise.
The Jupiter UK Growth fund returned 58.1 per cent over three years as of 24 September, according to FE Trustnet compared to IA UK All companies average performance of 31.4 per cent.
