The co-manager of the £27m fund has trimmed exposure to firms that design and manufacture components for larger industrials, and which have been caught up in the latter’s capital expenditure cuts.
In their place, he has shifted in “consumer defensives”, such as Dairy Crest and Photo-Me International.
The fund, which operates a strong small-cap bias, had 13.8 per cent in industrials and 12.7 per cent in consumer stocks at the end of April.
Mr Baker, who manages the fund alongside David Taylor, said defensive stocks were necessary despite the growth focus of the portfolio.
He added the stocks still met Chelverton’s screening process, which filters companies with low gearing and the ability to convert a high proportion of their profits into cash.
The pair have three-fifths of their portfolio in structural growth companies – including 25 per cent in technology stocks, which have driven performance over the past year.
With the remaining two-fifths in cyclical growth firms, the managers said a defensive move within this bucket was warranted at a time of macroeconomic unease.
Mr Baker said: “The market this year is somewhat becalmed by the Brexit vote, much like it was last year by the general election. Investors are increasingly sitting on their hands, and unfortunately businesses are too. Business activity is slowing, which makes it difficult to know whether to change your portfolio or not.
“If we come out [of the EU] that uncertainty will persist for a while longer. If we stay in, some of these stocks will have a knee-jerk reaction, so we don’t want to be out of them.”
Chelverton bought into Dairy Crest (pictured) towards the end of 2015 after the firm sold its dairies business to German rival Müller, signalling a move away from milk production in order to focus on other dairy products.
Mr Baker said the stock did not meet the fund’s financial screen prior to the sale, but once it sold its “capital-intensive, low-margin” milk business it became the right kind of profitable, cash-generative firm.
Meanwhile, the manager said he became interested in Photo-Me International once it branched out into offering laundry services on supermarket properties.
“It’s a nice growth concept that seems to be working well and adds a new growth angle to Photo-Me. It will only invest when it gets a cash payback and we like that,” Mr Baker said.
He said the fund was continuing to monitor oil, gas and mining supplier stocks and admitted it could get “left behind” in the event of a rally.
“We need to be attentive to what is happening to the oil price to see if we need to go back into the market,” he said.
“It still feels right not to have exposure there, but it is an area where if we see a pick-up, or if mining stocks rise, we’ll get left behind.”
The MI Chelverton UK Equity Growth fund has returned 16 per cent over one year, compared with its sector’s average loss of 7 per cent, data from FE Analytics shows.
