Fidelity Multi Asset Open Growth manager Ayesha Akbar has been moving up the cap scale in UK equities, in part due to a belief that sterling’s slump has “some way to go”.
Ms Akbar began reducing her exposure to UK domestic portfolios in the run-up to the referendum, saying she was not comfortable with markets pricing in a vote for the UK to remain in the EU. This took the form of cutting her small-cap plays.
The manager cut her position in the Franklin UK Smaller Companies fund as part of the view that firms which are heavily reliant on the UK economy would suffer more than those with international exposure.
“They have done well within the UK small-cap space in that they’ve been cautious, so it’s been a decent performer,” she said.
“But I’m still watching risk there so I’ve reduced and tried to move my overall UK exposure a little bit higher up the cap scale. The larger-cap companies will benefit more from the depreciation that we’ve seen in sterling.”
The currency has fallen against the dollar from a high of $1.50 on the night of the referendum to as low as $1.28, before recovering slightly last week.
Ms Akbar said she was underweight sterling and thought it could still fall further.
“The bulk of my exposure was to non-UK equities, which has helped as we’ve seen sterling fall off,” she said. “I don’t want to get too cautious at this stage, but I think there’s still some way to go in terms of sterling depreciation, and that means holding overseas assets is generally going to be a good thing.”
The Bank of England (BoE) is set to ease policy in an attempt to safeguard the economy following the Brexit vote. Meanwhile, in the US the Federal Reserve is seen as less likely to raise rates as a result of the decision.
Ms Akbar said: “I think there’s a reason to think that central banks will become more accommodative so I don’t think we’re going to see any rate rises from the Fed, given it had [hinted]Brexit was a risk it was looking at. I think we’re going to see a lot of accommodation from the BoE as Mark Carney [has] indicated.”
The manager has increased her fund’s exposure to emerging markets by adding to positions in the Fidelity Emerging Markets fund for its “quality growth”, and the Eaton Vance Emerging Markets vehicle for its exposure to Latin America, which she believes is starting to perform again.
She also added to the Independent Franchise Partners US Equity fund, which focuses on “solid growth stories in the US”.
Her portfolio does not invest in the open-ended UK property funds that have been hit particularly hard following the Brexit decision, instead preferring closed-ended vehicles for property investments.
“The good news is we’ve never been invested in direct property,” the manager said.
“I’ve always been wary of the illiquidity of the asset class, which we’ve now seen manifest itself.”
The Fidelity Multi Asset Open Growth fund has delivered 12.7 per cent over three years, while the IA Mixed Investment 40-85% Shares sector returned 17.6 per cent for the same period, data from FE Analytics shows.
