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; request a free guide on NISAs from Hargreaves Lansdown

Sport
footballHe started just four months ago
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
PROMOTED VIDEO
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

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

    Aren’t you glad you didn’t say that?

    The worst wince-and-look-away quotes of the year
    Hollande's vanity project is on a high-speed track to the middle of nowhere

    Vanity project on a high-speed track to nowhere

    France’s TGV network has become mired in controversy
    Sports Quiz of the Year

    Sports Quiz of the Year

    So, how closely were you paying attention during 2014?
    Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

    Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

    From Armstrong and Miller to Pointless
    Sanchez helps Gunners hold on after Giroud's moment of madness

    Sanchez helps Gunners hold on

    Olivier Giroud's moment of madness nearly costs them
    A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

    Christmas without hope

    Gaza fears grow that conflict with Israel will soon reignite
    After 150 years, you can finally visit the grisliest museum in the country

    The 'Black Museum'

    After 150 years, you can finally visit Britain's grisliest museum
    No ho-ho-hos with Nick Frost's badass Santa

    No ho-ho-hos with Nick Frost's badass Santa

    Doctor Who Christmas Special TV review
    Chilly Christmas: Swimmers take festive dip for charity

    Chilly Christmas

    Swimmers dive into freezing British waters for charity
    Veterans' hostel 'overwhelmed by kindness' for festive dinner

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect