SVM’s Colin McLean has said he will not change his stance on energy and mining, despite a lack of exposure being responsible for underperformance in early 2016.
The £138m UK Growth Fund, managed by Margaret Lawson and Mr McLean, has less than 1 per cent in oil and gas stocks, but the FTSE All-Share Oil and Gas index is up more than 12 per cent year to date. The portfolio has shed 7 per cent over the period compared with a loss of 2.8 per cent for the typical UK All Companies fund.
While Mr McLean said it had been “unhelpful” not to have oil, gas and industrials in the fund, he has not returned to the area.
Instead, the manager has trimmed other underperforming sectors and is backing “big cash stocks”.
He said: “We’re not loving the mining stocks. Wage growth has slowed so some consumer stocks will have brought down the fund as well.”
Mr McLean has increased holdings in BT and British American Tobacco (BAT) at the expense of struggling retailers such as Ted Baker.
He said the clothing business was “going through a challenge” but remained confident there was still demand for the affordable luxury products.
The decision to increase BAT came as a complementary move to a position in Imperial Brands, and is part of the fund’s play on overseas earnings and a stronger US dollar.
BT, a more domestic play, was increased after a Competition and Markets Authority review said the firm did not need to sell its telephone and broadband infrastructure network. Mr McLean said this meant the telecoms market would not be restructured to the extent that had been expected.
However, the manager remains concerned about the UK and global economy. While confident on his gaming and airline growth stocks’ structural advantages, he said the firms would be best placed to flourish in the event of wage growth coming through, of which there remained little sign in the UK.
He said central banks and politicians would have to start the issue or face the consequences from domestic populaces.
“You don’t have to be Jeremy Corbyn to see [wage growth] is a good idea,” he said.
On the upcoming EU referendum, Mr McLean noted the uncertainty had pushed back better initial public offerings, with those currently coming to market only doing so to avoid competition.
