SLI’s Morris backs banks to buck trend
Standard Life Investments’ Jeff Morris is betting on banks as he attempts to scale up the size of his £65m American Equity Unconstrained fund.
Mr Morris has upped his weighting to financial services firms, believing they represent a particular opportunity in the current environment.
He said: “Volatility in the market has presented a few opportunities but there has been nothing to dramatically cause us to change our view on the US market.
Mr Morris said banks had a low sensitivity to interest-rate rises and improving fundamentals.
The manager has “more than doubled” his holding in Citigroup, saying: “Citigroup is trading well below its tangible value, despite an improving capital-return story and dissipation of its litigation costs.”
“If there has been one change it is to increase our weighting to the financial services sector,” he said.
The manager has also taken a position in investment bank Morgan Stanley, believing the company has been “rehabilitated”, adding: “The valuation has become more attractive.”
As of August 31, the portfolio had a 25.2 per cent weighting in information technology, 20.2 per cent in consumer discretionary and 14.9 per cent in financials.
Mr Morris has slightly taken down his industrials exposure – which stood at 11.5 per cent at the end of August – over the course of the year, while moderately increasing his consumer discretionary holdings.
One stock he favours in the consumer discretionary sector is clothing firm Hanesbrands, which he sees as an “attractively priced” source of potential growth.
He said: “We felt like the company was attractively priced and they have potential to grow via acquisitions. The company has done an exceptionally good job of integrating its [previous] acquisitions.”
The changes come as Mr Morris focuses on attracting more assets into the fund – which remains relatively small at £65m.
Mr Morris remains positive about the fund’s growth prospects, as well as the future for US equities, saying: “If we clear up the headwinds and bring some degree of certainty on China and emerging markets, and some clarity in terms of Fed policy, the market can appreciate.”
According to FE Analytics the fund returned 59.9 per cent over three years, compared with 45.9 per cent from the IA North America sector.
