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By Larger companies have not looked so attractively valued for

Larger companies have not looked so attractively valued for over 20 years. This fund could be a great way to benefit.

Everyone loves a bargain, but sometimes we don't mind paying a bit more for quality. Historically in the stock market strength, security and quality were desirable so the shares of larger companies, known as blue chips, commanded a premium.

The largest 15 companies in the UK market are now known as the `mega-caps'. Companies such as BP and HSBC have strong brands, tried and tested business models and competitive positions. These generally pay strong dividends, providing a regular income in addition to any capital growth.

Traditionally, investors have always paid a higher price to invest in quality businesses. However the mega-caps are now relatively more attractively valued than at any time in the last 20 years. So not only can you buy quality, but you could be getting a bargain at the same time.

HSBC is a great example. It is one of the largest financial services organisations in the world. It has a rock-solid balance sheet, is extremely well diversified with presence in over 75 countries and has good growth prospects, particularly in the faster growing markets of Asia. Since 2000 its profits have grown by 80% but, even with dividends reinvested, the shares have only risen by 50%. This offers considerable scope for share price growth if the longer term trend for valuing these companies reasserts itself.

The Schroder UK Alpha Plus Fund encapsulates these exciting opportunities. Currently more than three quarters of its focused 32 stock portfolio is invested in larger companies and the fund manager, Richard Buxton, has a superb track record. The fund is approaching its five year anniversary in July and since launch it has generated a return of 134%. Over the same period the FTSE All Share Index is up by only 76%, although please note past performance is no guide to the future and the value of this fund can fall as well as rise (Source: Lipper, 05/07/02 to 30/04/07).

We believe larger companies currently offer excellent value and, with a proven fund manager at the helm, the Schroder UK Alpha Plus Fund could be in an excellent position to benefit over the long term.

The Schroder Uk Alpha Plus fund is available through Hargreaves Lansdown with an initial saving of 5.25%. Investors can apply online with a debit card or download application forms or transfer forms from our website.

The Fund of the Month is written by Hargreaves Lansdown. An independent broker offering unit trust, stockbroking, pension and investment services.

Useful links:

• See details of Schroder Uk Alpha Plus


• More from Hargreaves Landsdown