HSBC, at 6%, is the largest company in the FTSE All-Share index so it is no surprise that the majority of S&P Capital IQ-rated funds held a position in the their portfolio. Five of the six funds rated AAA by S&P Capital IQ featured HSBC as a top-10 holding, although all were underweight.
The exception to this was Andrew Green, who runs GAM UK Diversified fund. The more contrarian managers, such as Green, were the most heavily invested in Lloyds and RBS as opposed to HSBC and Standard Chartered, which are generally viewed as being the highest-quality names in terms of earnings exposure and balance sheet.
David Cumming at Standard Life Investments, for example, attempted to take advantage of sector rotation and rapid changes in sentiment in July/August and added to existing positions in Barclays, Lloyds and RBS. However, other members of the UK team, such as Karen Robertson, require more certainty in earnings growth, and so have favoured HSBC and Barclays, with a small position in Lloyds.
Sanjeev Shah, manager of Fidelity Investment Funds – Special Situations Fund graded was another contrarian manager tempted into Lloyds and RBS because of attractive price-to-book values.
Among focused fund managers, opinion was sharply divided as to whether banks were among the best ideas on offer and also whether managers were willing to tolerate the volatility of banking names within a less-diversified portfolio. Premier UK Alpha Growth Fund and Legal & General Growth Trust both held HSBC in their top-ten names; SVG UK Focus Fund and Invesco Perpetual UK Aggressive had no banks at all, while the BNY Newton UK Opportunities Fund has 1% positions in Barclays and Lloyds.
