View the article online at http://citywire.co.uk/money/article/a650054
'Major' share boost expected from derided lending scheme
Top-rated Neptune fund manager Mark Martin says the Funding for Lending scheme will be 'really bullish for the market'.
The Bank of England may have found a fan base for its much-derided ‘Funding for Lending’ scheme: investors in mid-sized companies.
Contrary to criticism that the scheme is a ‘white elephant’ which has failed in its objective to incentivise banks and building societies to lend more and lubricate Britain’s stuttering economic engine, the most successful fund manager of British mid-cap companies over the past three years says it will be a ‘major positive for the stock market in 2013’.
Bank of England data showed that lending has only edged up narrowly since the scheme was launched in August. Critics even say the scheme could have depressed already-low savings rates for consumers, as banks have less need to attract cash from savers.
But Martin cites separate survey data showing that credit to both households and companies increased in the fourth quarter of last year, while expectations are for further rises.
‘The best thing of all is that central bank lending isn’t nearly as cyclical as private sector lending and I think that really reduces the likelihood of a 2007/2008 style event whereby credit as we all know completely disappeared,’ he said.
Some housing market watchers have become more optimistic that the scheme will de-congest the mortgage market.
Mike Farley, outgoing boss of housebuilder Persimmon, said on Tuesday that there were already signs the scheme has helped boost mortgage lending.
With this backdrop, Martin is increasingly optimistic about the outlook for housebuilders, recently buying into Bovis Homes (BVS.L). He also has positions in Galiford Try (GFRD.L), a former Citywire Top Stock, Redrow (RDW.L) and Bellway (BWY.L).
A bullish Martin also reckons small and medium sized companies will benefit from increasing corporate action. He said large companies need new sources of revenue growth in the tough economic environment. ‘There aren’t many more levers that large cap companies can pull to significantly expand earnings,’ so cheap, niche FTSE 250 companies could become targets.
Martin has been running the mid-cap Neptune fund since launch in 2008. Over the past three years the fund has returned 81%, nearly doubling the benchmark performance of 42%.
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