Mark Dampier: The market is ready to rally at last

The Analyst

This week I thought I would talk about three funds rather than the usual one. All three are centred on the UK market and two I have already featured this year – namely the Standard Life Recovery Fund and the Schroder UK Alpha Plus Fund. The remaining fund is a new launch from Old Mutual, the UK Dynamic Equity Fund.

If you read my comments last week you will know that I am fairly gloomy about the state of the UK economy. The question is how much of the bad news is already reflected in the market. Back in March, the market seemed to be priced for the very worst outcome – the subsequent rally since then has been based largely on the fact that things are getting less worse. Companies that were expected to go bust have been brought back from the brink, notably the banks.

The three managers of these funds all remain optimistic, but are definitely not bulls of the UK economy. Investors should remember the economy and market do not necessarily behave in the same way.

The Standard Life Recovery Fund was launched near the low point of the stock market in early March. David Cummings, head of UK equities at Standard Life, has had a fantastic spell, with the fund rising over 50 per cent. In the last week he added even more of his own money to the fund, believing the market can hit 5,000 by the end of the year.

He does not expect to see it below 4,000 again. The Standard Life team is relatively upbeat seeing many opportunities coming through its door every day. Bear in mind it manages over £30bn worth of equities so have considerable expertise.

In January, I highlighted the Schroder UK Alpha Fund. The fund had experienced a fairly torrid time and its weighting in banks had been detrimental to performance. However, since then it has rallied very strongly and, in a recent meeting with Richard Buxton, I found him optimistic on his portfolio.

He has been trimming his holdings in banks and other successful holdings – including Next, Home Retail and Reuters – but he has not sold any completely. He believes, like David Cummings, that we have seen the low point and are now in a trading range.

He believes the real test will come in the autumn when we will see whether company orders are really picking up. Into next year he believes that GDP will not be much more than 1 per cent – and it could even be less – but, either way, it is going to be a tough environment. It is here that his stock-picking abilities will come through. He thinks there will just be a few winners and his portfolio is concentrated at 32 stocks. He is looking for companies with good earnings visibility, which will grow through a tough economic environment.

These include Experian and BG, while he has also been buying Glaxo which he views as far too cheap.

That leads me on to the new Old Mutual UK Dynamic Equity Fund where I have found the manager, Luke Kerr, in a similar frame of mind. However this fund does have slightly more ammunition in that it can also short. It is not an absolute return fund; in fact, it will have the characteristics of a long-only fund, but with some defensive qualities when the market falls.

This is Old Mutual's best ideas portfolio, so it has a hunting ground across the market capitalisation, but their real expertise – and where they find the most opportunities – do tend to be the mid and small cap area. The fund is also likely to be limited in size at around £200m.

This is a fund to take a look at sooner rather than later as I believe the team behind it is one of the strongest in the city.

Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'