Andrew Summers leads a team that buys funds for private clients of Investec and manages £15bn.
He said he is broadly positive on the outlook for the global economy, and believes inflation and interest rates will soon rise.
If he is correct, he said certain styles of investing will fall from favour and the funds following those styles will suffer a period of poor performance, as market sentiment changes.
Mr Summers currently likes funds invested in more cyclical companies, whose share price is affected by ups and downs in the overall economy, typically those that sell discretionary items consumers can afford to buy more of in a booming economy and cut back on during a recession.
Nick Train's £1.2bn Finsbury Growth and Income Trust is one example, he said, along with others deploying the same style, of funds he would expect to underperform if interest rates are hiked causing bond yields to rise.
This is because the fund is heavily invested in stocks such as Unilever and Diageo.
Mr Summers said those stocks have performed well while bond yields are low because the dividend income paid is viewed by many market participants as being almost as durable as the income an investor gets from a bond.
But his view is that as interest rates and bond yields rise, those investors will move back to bonds, causing a period of under performance for those stocks, and consequently, the funds with significant exposure to them.
At the same time he said funds that buy more cyclical assets will come into favour.
Unilever is the top holing in Mr Train's Finsbury Growth and Income Trust. The trust has returned 234 per cent in the decade since the financial crisis, when interest rates began to tumble. The AIC UK Equity Income sector returned 74 per cent in the same time period.
Mr Summers is a fan of Mr Train as a fund manager and said he expects the long-term performance to continue to be strong, but that it will see relatively weak performance as interest rates rise.
Laith Khalaf, senior analyst at Hargreaves Lansdown said all manager styles are prone to periods of weak performance and the quality growth stocks preferred by the likes of Train are no exception.
"They have done fantastically well in recent years, and there will come a point where the worm turns and the rest of the market catches up, however that could still be some considerable time away.
"For investors the key is to maintain a diversified portfolio, both in terms of stocks and regions, but also in terms of manager styles.”
The second type of equity fund Mr Summers believes will under perform as interest rates rise are those with a significant exposure to large technology companies.
He said companies such as Amazon, which are growing, have enjoyed a period of strong share price performance partly because, in the world since the financial crisis, when there has been little growth in evidence, any business showing growth became extra valuable.
Mr Summers said in a world where interest rates are rising this is likely to be because global growth has improved. That should lead to more companies displaying underlying growth, and so the growth currently so attractive about companies such as Amazon would be less attractive and lead to a period of share price underperformance.
However James Anderson, manager of the £6.3bn Scottish Mortgage Investment Trust, which is invested Amazon shares, believes the growth from those companies will continue exponentially for years to come due to their strong market positions and ability to disrupt existing industries.
The Scottish Mortgage Investment Trust has returned 357 per cent in the decade since the financial crisis, compared with 131 per cent for the average trust in the AIC Global sector in the same time period.
On the flip side, Mr Summers believes that high yield bonds, and the funds primarily invested in them, could suffer as interest rates rise.
Investors whose natural habitat is government bonds or other lower risk parts of the bond markets, have been “forced into” taking more risks in assets such as high yield bonds, due to low yields in government bonds, he said.
Some high yield bonds pay a yield of 6 per cent, “which is not really high yield as we have understood it in the past,” he added.
He said as interest rates rise, and the yields on government bonds go up, then the spread or gap between the income that can be attained from the low risk government bond and the higher risk asset will narrow.
The narrowing of the gap would, in his view, lead to some investors fleeing the high yield asset class for the lower risk one, causing under performance for those funds with exposure to such bonds.
David.Thorpe@Ft.com
