Investments  

Election volatility to throw up opportunities

Election volatility to throw up opportunities

Volatility surrounding the election is set to throw up opportunities for fund managers, according to Rosemary Baynard, manager of the Schroder UK Mid Cap fund and Guy Anderson, manager of the Mercantile Investment Trust at JP Morgan Asset Management.

Speaking today at an event held by the Association of Investment Companies in London, Ms Baynard stated that volatility would throw up opportunities.

Mr Anderson’s thoughts resonated with Ms Baynard’s, as he said: “Volatility almost always throws up opportunities in one direction or another.”

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Ms Baynard added that it was difficult to know how long the volatility would last.

“It could carry on for some months or it could just be weeks depending on formation of a government how long it takes. It’s difficult to say.

“To be precise in terms of us we are a much smaller trust than Mercantile and the board is reluctant to shrink it further because it takes the view that illiquidity that ensued would not be in the interest of shareholders so although they have a buy back permission they have not used it for quite a long time.”

However, Mr Anderson said of the election that he expects a conclusion to be drawn quickly.

“One thing I would add is whilst the outcome could be very messy and there are clearly a great number of permutations and combinations possible, I would expect some sort of agreement to be reached in days rather than weeks.

“I think whilst all the politicians are saying they are targeting the majority and there are no discussions going on I would take that with a pinch of salt.”

Elsewhere, Ms Baynard said the one sector which has been “outstandingly good” has been housebuilders.

“Of course every part is recognising the need for more housing to be built but there is the problem of, the chief problem is planning permissions are still lagging behind the demand.

However, housebuilders share prices have been hit dramatically today after Ed Miliband announced plans to impose rent controls on landlords, according to reports from the Daily Telegraph.

“It is also interesting to note that the sectors where there’s really struggling, where we have negative top line tend to be FTSE 100 sectors.”

She added that there has certainly been a fall off in the rate of inflation of services.

“It does depend which rate of service you are in, I mean if you are in the building sector, skills in that whole supply chain they are seeing increasing inflation and challenges with skill shortages but for a lot of other people actually there isn’t much inflation in the services people are supplying.

ruth.gillbe@ft.com