Nathan Sweeney’s Multi-Manager UK Equity Fund has bolstered its exposure to the Fidelity Moneybuilder Dividend Fund. The move represents a rise from 15.5% of the fund’s holdings to account for around 18%, with a subsequent reduction to some of its cyclical assets as a result.
With the weighting change Sweeney seeking short-term capitalisation on low interest rates and bond yields – plus the uncertainty leading up to the UK general election – through increased contact with defensive large-cap income stocks.
“As bond yields continue to be pushed down investors are increasingly looking for income opportunities,” Sweeney explained. “Often the first place to look is the equity income segment of the market with the choice for investors then between mid or large-cap exposure.
“Large, stable stocks with slower growth are more like a bond proxy so are likely to prove popular in the short term. There is therefore a structural driver for large cap income stocks if interest rates remain low and yield from bonds remain challenged.
He continued: “Valuations are being questioned in this sector but we expect valuations to become more expensive due to the interest in yield. These yields need to really come down for investors to shift to the next risk level and enter the mid-cap space.
“A further factor driving demand for more defensive stocks is political uncertainty ahead of the UK general election. Overall we see this trend for large cap, defensive stocks to continue for some time so have tilted our portfolio accordingly.”
The MM UK Equity Fund also has significant exposure to the BlackRock UK Equity Tracker, Artemis Capital and Majedie UK Equity X funds, equating to 19.62%, 12.36% and 12.20% respectively.