Axa Investment Managers’ Jamie Hooper is switching his UK equity fund into companies that do much of their business overseas, amid fears for the domestic economy.
Mr Hooper, manager of the £261.3m Axa Framlington UK Growth fund, said the UK equity market has reached the “mature stage” of its cycle and was likely to succumb to volatility in 2015.
According to the International Monetary Fund, the UK is estimated in 2014 to have grown at the fastest pace of any G7 nation, a group which includes other major advanced economies.
But Mr Hooper is cautious on the country’s growth prospects for the upcoming year and this is leading him to invest in stocks that generate a large proportion of their profits outside of the UK.
“To invest in UK equities is not necessarily to invest in the UK economy. There are so many themes affecting the market,” he said.
The manager is instead hoping to exploit the theme of a growing number of people globally entering the middle classes, defined as having increasing disposable income.
Mr Hooper said: “Growth in the middle classes is dominated by Europe and the US, but soon it will be dominated by Asia and the rest of the world.”
The concept of tapping into the rising number of consumers in the developing world has long been a focus of equity managers.
But many stocks have fallen out of favour recently as the UK growth story has dominated the agenda and the strength of sterling has hit many internationally focused companies.
Two stocks Mr Hooper is using to play this theme are global consumer services firm Experian and contract catering company Compass Group.
He bought into Experian in the fourth quarter of 2014, having not held the stock for two years. The stock now makes up 2 per cent of his fund.
He said: “The company’s growth had slowed. It had some undesirable exposure to Brazil and it made some expensive acquisitions.
“But growth is starting to recover and we expect [Experian] to return capital to shareholders during the next 12 months.”
Compass is the largest overweight position in Mr Hooper’s portfolio compared with its benchmark, the FTSE All-Share index, and is one of the manager’s biggest bets on exploiting the growth of a global middle class.
“As the middle class grows, people will outsource more,” he said.
“Compass is the largest catering company in the world, but at present it only has 7 per cent of the global food market share.”
Since he took on the Axa Framlington UK Growth fund in 2006, Mr Hooper has outperformed both the market and his peer group average by more than 10 percentage points, according to data from FE Analytics.
But the fund has underperformed the FTSE All-Share index in the past year, losing 1.5 per cent compared with a 0.3 per cent drop in the index.
However, it did beat the IA UK All Companies sector average return of -2.2 per cent.