UK savings trend spurs Montanaro to back asset managers
Charles Montanaro has committed to back asset managers in his UK Income fund as the country’s “well-established and quite ingrained” savings culture gets a boost from changes to Isas.
The manager of the £130m vehicle, and also the founder of Montanaro Asset Management, said holdings such as Jupiter and St James’s Place (SJP) continued to offer an upside.
He noted that Jupiter, which made up 4.2 per cent of the fund at the end of February, offered strong long-term prospects, while SJP continued to benefit from the effects of the RDR.
Mr Montanaro has 10 per cent of the fund’s 40-stock allocation to asset managers, a level he is “comfortable” with but is unlikely to increase.
He said: “Some 68 per cent of Jupiter’s funds have outperformed and it has a long-term strategy. The company is yielding more than 5 per cent and I don’t think anything has significantly changed.
“SJP’s assets could grow at 10 per cent a year. We like SJP because it is a prime benefactor of the RDR, which has driven many of the good advisers to join [the company].”
The manager also thought recent changes, such as a rise in the yearly Isa allowance, would help boost a pre-existing savings culture, which was likely to help asset managers. “The trend for saving and awareness of the need for saving is well-established and quite ingrained,” he said.
Mr Montanaro said he was unperturbed about the prospect of a Brexit and a weakening sterling. Management at his holdings seemed “reasonably relaxed”.
“Around 30 of the 40 names in the portfolio are domestically biased and largely unaffected. The ones that are affected would see some impact in terms of the currency,” the manager said.
“Holdings such as [engineering specialist] RPS sell to the US and the Netherlands. They have a globalised company and quite large overseas earnings, so they would benefit [from a weaker pound]. These firms seem reasonably relaxed.”
| Montanaro funds |
4.2%: The UK Income fund’s weighting to Jupiter at the end of February 70%: The European Income fund’s crossover with the trust it used to mirror |
Meanwhile George Cooke, who manages the £84m Montanaro European Income fund, has tweaked his portfolio in a quest for yield following changes to the vehicle’s approach.
Late last year the product was converted to a European income fund, after previously serving as an “open-ended mirror” to the firm’s European Smaller Companies Trust.
While Mr Cooke stressed the vehicle still had a “70 per cent crossover” with the trust, he has removed holdings that offered little or no dividend.
This has involved him selling companies such as Sartorius Stedim, which provides equipment and services for the biopharmaceutical industry.
“That’s a great growing business, but it’s reasonably capital intensive. They don’t pay much of a dividend,” Mr Cooke said.
Meanwhile, the manager succumbed to the trade-off plaguing income managers amid testing times for the sector. He added names that offered a payout but lower growth prospects, such as German TV company ProSieben.
“We sold the companies that didn’t pay a dividend or had a small yield. In their place we bought some mid-cap firms that had a yield,” he explained.
