Mr Spencer, who runs the £830m Franklin UK Mid Cap fund, said that it was “not impossible” that some stocks had fallen out of the fund’s investable universe of companies because of liquidity issues.
He cited clothing retailer Ted Baker as an example of a low-volume stock in which it would be difficult for the manager to build up a meaningful position. Mr Spencer typically invests a minimum of 1.5 per cent of the fund in each position.
“Some stocks in the [Franklin UK Smaller Companies] fund I would like to put £15m-£20m in but I can’t do that in the UK Mid Cap fund because of the liquidity of that stock,” Mr Spencer said.
“It’s not impossible that the investment universe of the fund has shrunk [but] it has only affected a handful of stocks.”
The manager said he and the UK equity team were “on the case” regarding the capacity of the fund but maintained that he still had sufficient capacity to implement his strategy effectively.
Mr Spencer added: “In the move from £600m to £830m in size, only £50m is new money into the fund. Just because the market goes up it doesn’t affect our ability to run the fund.”
The Franklin UK Mid Cap fund is top quartile in one, three and five year periods to May 20 within the IMA UK All Companies sector, according to FE Analytics. It is the best performing fund in the sector in the past 10 years, having gained 456.6 per cent.