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Smaller companies have had a tough time over the last year not helped by the economic slowdown. During periods of economic weakness many smaller companies suffer as their fortunes are closely linked to the UK economy. This is why stock picking
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It is often when sentiment is at rock bottom that the best opportunities may be found. Moreover, it pays to invest with the proven fund managers. We make no secret that we believe Old Mutual has one of the best smaller companies teams around. Dan Nickols manages the Old Mutual UK Select Smaller Companies Fund and he is a great example of a truly active manager.
The fund has been fairly cautiously positioned for some time with exposure to oil services, healthcare and aerospace companies. These have been less sensitive to the economic slowdown. Dan Nickols is fairly downbeat about the UK consumer because of dampened economic prospects and he is largely avoiding these sectors.
Whilst the overall view has not changed, Dan Nickols has begun to make some changes to the portfolio in recent weeks. He has added some financial companies like Aberdeen and New Star Asset Management to the portfolio. He believes their valuations are extremely attractive and he is using the weakness to buy these shares as there could be a sustained rebound in some companies.
Additionally, he has increased the fund’s exposure to industrial firms as these are businesses where a large proportion of their earnings come from overseas. He believes these firms are set to benefit from global growth which is stronger than in the UK.
We remain long term supporters of this fund and believe proven fund managers like Dan Nickols have the ability to deliver superior long term returns. At the end of this year Dan Nickols will become head of the UK Mid and Small Cap team as Ashton Bradbury relinquishes his day to day fund management responsibilities to take up a role as Head of Equities. We believe Ashton Bradbury has built one of the best UK Mid and Small cap teams in the industry and while he will no longer manage money, he will still be at the firm providing guidance and support to the overall equities team.
This fund itself is unusual because it only has a limited number of units in issue. This is to ensure the fund does not grow too big and inhibit performance for existing investors.
The good news is that there is currently a tranche of units available. We believe the Old Mutual UK Select Smaller Companies Fund offers exposure to one of the best smaller companies teams in the industry.
» Key Features of the Old Mutual UK Select Smaller Companies FundFund research is provided by Hargreaves Lansdown. Hargreaves Lansdown is an independent broker offering unit trust, stockbroking and other pension and investment services. No news or research item is a personal recommendation to deal.