Resolution maintains blue chip bias
Resolution Asset Management says it will maintain a predominantly blue-chip bias until British consumers acknowledge the extent of the credit crisis and tighten their belts.
UK focus fund manager Ralph Brook-Fox, whose £19m fund is top quartile over one, two and three years, says he refuses to ‘bottom fish’ among domestic FTSE Mid 250 stocks until there is evidence that consumers are scaling back their borrowing habits and showing signs of greater financial control.
Holding no retailers except Tesco, Brook-Fox is focussing on companies with significant overseas earnings and growth potential. He has added mining giant Anglo American on a recent pullback as well as the industrial company Smiths Group, where new management is expected to deliver improved performance.
Brook-Fox’s domestic exposure is very selective. He has recently added Lloyds TSB to his portfolio – reducing his financials underweight – believing that its strong deposit and capital base should position it well to take share from its more challenged competitors. He expects new holding Capita to continue to benefit as government budgetary constraints support the outsourcing model.
Despite his caution on the UK economy, Brook-Fox has no plans to add to his portfolio’s 28 stocks, arguing that each holding has been bought to outperform and there is no need to reduce the fund’s focus or dilute potential returns.
He said: “We believe we need to be blue-chip and global at the moment in terms of where we are seeking ideas for the portfolio, even if it can appear a little boring. We will only consider domestic midcap stocks when there is evidence that UK consumers are taking the challenging economic outlook on board and where forecasts become more realistic. That needs to happen before we can bottom fish – we would much rather play overseas earnings and international growth in the meantime.
“The Federal Reserve’s recent action has avoided Armageddon but there will still be significant real economy impact from the credit crunch and we need to get through it first.”