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'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'.

 
'Major' share boost expected from derided lending scheme

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’.

Mark Martin, who earns a rare AAA rating from Citywire for his success running the Neptune Mid Cap fund , said: ‘I believe it will be really bullish for the market.’

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%.

3 comments so far. Why not have your say?

ajay

Jan 11, 2013 at 16:29

Well, isn't that good. That's mid-caps getting cheap finance from my savings, plus my neighbours getting cheap mortgages also and the government getting cheap loans due to QE. All in this together?? F--- Off!

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Roger Savage

Jan 13, 2013 at 14:40

ajay - if there was a scale of agreement on comments from 1-10 wth disagreement on 1 and total agreement on 10, I'd be off the scale on 12 for your comment! Absa-flippin-lutely!

The only thing I'd add is that people should start pulling savings from the banks and investing it elsewhere. Antiques, classic cars, wine, whisky - anything that represents a sensible way (albeit with a certain amount of risks) of depriving the completely undeserving banks of our money. Sadly, it's about the only action we can take as savers in the current mad environment.

Also, we can play them at their own game - there are a number of high yielding 'good quality' shares out there at the moment paying 5%+ - e.g. Glaxo, Dairy Crest, etc... plus there may also be an element of capital appreciation as a further benefit.

I appreciate all of the above represents a workaround to the completely unacceptable situation savers and pensioners find themselves in. But, other than a full on, organised, bank run, I can't see what else we can do in the increasingly crazy world we live in.

It does all make me wonder how much of the 'financial crisis' was pre-planned to ensure that the 'global elite' got rich by robbing the savers, whilst using the borrowers as a tool (and they are effectively rewarding them now for their contributions - pardon the irony - accordingly). It's effectively a massive wealth transfer exercise in my view.

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ajay

Jan 14, 2013 at 16:40

Thanks for your support Roger. Indeed this year I increased my investment in Income Funds and have had a good year. But it does mean that I have been pushed into a more risky strategy due to the excessive borrowing both private and government, neither of whom appear to suffer any penalty from being so profligate.

The problem with the banks is that they have used our money to fund risky investment games in which they take all the profits and we take all the risk. If the investment arms were forced to separate from the retail side, as used to be the case, they would have to pay proper rewards to those whose money they borrowed for their antics. Either that or they should have to assume unlimited personal liability for the gambles they take, much as happens with Lloyds underwriters.

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  • Neptune UK Mid Cap A Acc GBP
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  • Bovis Homes Group PLC (BVS.L)
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  • Bellway PLC (BWY.L)
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  • Mark Martin
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