With a main focus on technology, infrastructure and supporting the younger generation to get on the housing ladder, Lowcock (pictured) said the budget had a distinctly pragmatic business focus, with Chancellor Philip Hammond focusing on the longer-term.
“Overall the budget put in place some long-term thinking around the future of the UK’s economy and embracing technology and structural reform should benefit the economy and in particular smaller companies,” he said.
With these themes in mind, he has identified three funds which could benefit from the measures announced.
River & Mercantile Micro Cap Trust
“The portfolio will be mainly comprised of AIM-listed stocks but the manager, Phillip Rodrigs, can invest in companies with a market value of less than £100m. The fund will hold between 30-50 stocks and is not constrained by any benchmark, so doesn’t have to hold stocks in any sector.
“Rodrigs has balanced the portfolio between strongly cyclical, domestic-focused businesses and international earners. The main driver is that all the companies are in the portfolio because they have strategies that enable them to take market share. The fund has 14% in technology and 5% in real estate.”
Franklin UK Smaller Companies
“The managers, Richard Bulla’ and Paul Spencer, tend to take a cautious approach to investing in smaller companies, very much one of making long-term investment in companies with attractive risk/reward profiles. The managers are willing to take a contrarian stance when market mis-pricing creates outstanding investment opportunities.
“While economic and industry drivers are important considerations, the fund is built from the bottom up, with each stock included in the portfolio on its own merit. The fund holds around 13% in technology and 9% in construction and real estate.”
JO Hambro UK Equity Income
“James Lowen and Clive Beagles look for companies which have an above average yield and will sell it if the yield falls below that level. This process forces them to sell as well as reduces valuation risk in the fund.
“The managers look for companies which the market hasn’t fully appreciated the earnings growth story of and therefore undervalue the shares. They also have a bias towards mid and smaller companies. The stock selection drives the majority of the performance of the fund with the balance coming from sector allocation and market cap exposure.”
