You are here: Home - Investing - Experienced Investor - News -

Three funds that could benefit from a rate rise

0
Written by: Darius McDermott
02/08/2018
The rate rise to 0.75% is the first in nine months and only the second in a decade. While this move was already priced in to markets, three value funds could benefit as a result.

A couple of areas like house builders and the high street could take a hit. As mortgage repayments rise and consumers possibly need to tighten their belts, less money could be spent. Let’s not forget there is a generation of mortgage holders out there who have never experienced real rate rises.

Conversely, insurers and banks may benefit slightly, as could brokers if market volatility increases.

Slightly longer-term, if inflation becomes more entrenched but central banks find it harder to raise rates, the long-end of the yield curve could rise even if the short-end stays low. This inversion would be negative for quality growth stocks.

Value funds that could benefit from the rate rise

Investec UK Special Situations

Alastair Mundy has a well-earned reputation as one of the most disciplined and successful contrarians operating in the UK market today. His approach tends to be especially successful during turning points in investor sentiment when investment fashions change. He seeks to exploit the ‘herd’ mentality of capital markets by investing in UK companies that are both unloved and undervalued and the fund is currently overweight the UK banking sector.

Schroder Recovery

This quietly aggressive, value-driven fund has been run by the same lead managers since 2006, with a continuity of process and a very consistent track record. It invests in companies valued at less than their true worth and waiting for a correction. Recovery investors need a hard head and an open mind – being contrarian can be bruising but very profitable, as the long-term returns of this fund have shown. This fund is also overweight financials.

R&M UK Recovery

Finding undervalued companies that are yet to deliver on their potential is the aim of this fund. The manager uses his three decades of investing experience to identify companies where he believes management have the capability to turn things around. We like that he looks to add to his holdings at almost fire-sale prices in volatile times, which further increases the possibility of long-term capital appreciation. The fund is overweight financials and has five bank stocks in the top ten holdings.

Darius McDermott is managing director of FundCalibre

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week