Geffen, CEO and manager of Neptune’s income fund, warned people are losing sight of the “critical” issue of the UK economy with upcoming headwinds threatening to weaken the domestic economy further.
Dwindling consumer credit, higher inflation and stagnating wages will all contribute to the worsening conditions in the UK according to the Neptune team including Geffen, James Dowey and George Boyd Bowman.
Instead, the team have looked to the global economy to maintain returns for investors who depend on the income the funds provide.
Geffen said: “We believe the economy is fundamentally weak and getting weaker.”
He added: “Quite clearly we don’t believe in this thesis that the housing market will ride on and housebuilders will churn out increasingly profitable new developments, clearly given the weakness in the housing market and weakness in the economy that is simply not a good place to be.”
He has no exposure to domestic cyclical stocks, or to the UK banking sector and utilities where Geffen said regulation and government intervention are weighing heavily on long-term profitability.
The team have added to their exposure to the energy sector with stocks such as Exxon Mobil, but sold holdings in consumer discretionary stocks Greene King and WPP.
Geffen added there had been a “massive underappreciation of some of the more mature tech companies”, including Microsoft in the US and Sage in the UK.
On the wider economy, chief economist and CIO James Dowey said: “We see the rest of the global economy looking pretty healthy, in the US, Europe and China.
“We favour globally sourced earnings and globally sourced dividend streams and we are bearish on sterling.”
With consumption struggling and business uncertainty set to hit longer-term investments, Dowey predicts pushing growth will only get tougher for the UK going forward.
