Anthony Rayner, who jointly runs £900m across four multi-asset funds at Miton, has started to invest more in UK equities.
As FTAdviser has previously reported, there has been about £8bn of outflows from UK equity funds since Brexit, but Mr Rayner said this has led to a number of stocks becoming “cheap.”
The fund manager Neil Woodford, who runs two UK equity funds, has long maintained the negativity around UK equities is unjustified, but has focused much of the capital in his funds on companies that benefit from a better than expected outcome for the UK economy.
But Mr Rayner said: “We are certainly not buying UK domestic cyclical stocks that do better if the economy does well.
“We have been looking at the UK market for some time, and about three weeks ago began buying. But it is not about confidence in the UK economy.
“We have bought oil companies, as we think global inflation will continue to rise.
“We have also bought UK supermarkets. I know those are under a lot of pressure with discount retailers but I think generally higher inflation in the UK, caused both by sterling weakening from here and by higher global inflation, will allow supermarkets to put their prices up.”
He has invested in UK utility companies for the same reason.
David Goldman, who runs the £418m BlackRock UK Income fund, is also keen on the outlook for oil companies.
He said he does not have a strong view on the oil price, but said BP and Shell have prioritised dividend payments in recent years and cut costs, meaning, from an income investors point of view, “you can be sure the companies are willing to pay the dividend, and thanks to cost cutting, have the ability to pay the dividend.”
But William Meadon, who runs the £428m Claverhouse Investment Trust, which is a UK equity fund, said he is wary of investing in companies that have significant exposure to the UK economy.
He said that a “hard Brexit” would be “very damaging” to the UK economy and while such an outcome to the Brexit negotiations may not happen, he wants to “wait for the evidence” before investing in companies with a focus on the domestic economy.
Instead he is buying companies that while listed in the UK derive the greater part of their earnings from overseas.
However David Scott, an adviser at the firm of Andrews Gwynne in Leeds, said he expects a global recession in the near future so he has placed many client portfolios into 40 per cent cash in anticipation.