Richard Buxton is confident there will be a U-turn in the performance of his £2.1bn portfolio as some of his unloved holdings embark on a "huge sea change".
His Old Mutual UK Alpha fund has been trailing its benchmark over the past year, returning just 7.8 per cent against the FTSE All Share, which has returned 12.2 per cent over the same period.
Mr Buxton, who spoke during the Investival conference hosted by AJ Bell, admitted this underperformance has been "extremely painful".
In June the Old Mutual Global Investors chief executive told FTAdviser investors should expect the fund's performance to be "lumpy" and admitted it had suffered losses after selling out of some consumer staples.
Despite lagging behind the index, Mr Buxton has rested on his laurels and said he expects his conviction to pay off when inflation picks up and there is a general "sea change" across the markets.
Referring to his performance, he added: "I get there in the end, but I will give you a bumpy ride."
Following Donald Trump's win in the US election Mr Buxton said he "couldn't be happier" because, unlike most managers, he is not long on bond proxies like consumer staples which stand to suffer if inflation rises.
Mr Buxton reiterated his bullishness at seeing Mr Trump elected as the next US president, claiming it will be good for the global economy.
"Over the past 18 months, I thought the bond market had got ahead of itself on a medium term valuation basis.
"Bond yields already started rising a month before Trump's election," he said, adding the yield curve is now drastically steeper which is a boost for his holdings in banks.
Mr Buxton said: "This has been the most under-owned, most uneuphoric bull market I have ever lived through, but I think we are at a huge turning point."
He pointed to research which found 81 per cent of investors thought banks were "uninvestible", and admitted this sector is "hated by everyone".
"If you believe there is a genuine change coming now and all those safe consumer staple bond proxy names will be void by this fear of inflation, then the fund will be very compelling over the next few years," he said, adding: "The headwinds for financials will reverse into tailwinds."
Over the past 12 to 18 months Mr Buxton said he has "quite deliberately" increased exposure to mega-caps, which he said have been extremely under-owned and undervalued.
He also pointed out that for the most part these companies are dollar-denominated, and can therefore benefit from the strong US currency.
"Sterling will continue to weaken from here and that will continue to be a huge support for these huge multi-national companies."
While he admitted the large number of mega-caps in his portfolio might make it look like a "closet-tracker" fund because many of the big names appear on index-linked strategies, he said the fund is "anything but that".
Alan Steel, director of Alan Steel Asset Management, said: "We are not holders of Buxton's fund, but agree with his views.
"I think value and 'dumb beta' are very undervalued and there are already signs that change is coming.
"We expect managers like Buxton to outperform as investor and adviser money still chase yesterday’s growth winners and/or perceived caution."
