Shah is around 8% overweight in banks, with around 1.5% held in RBS, which he backed to benefit from long-term restructuring.
‘[Chief executive Stephen] Hester is doing a fantastic job,’ he said. ‘The nature of the turnaround is more complex, given the issues they face. Also, if I were a betting man, I would guess that RBS would exit the US over the next three years and become a pure retail bank.’
He said that banks would help to power performance in an environment of low growth.
‘[Banks] are conservatively run, with big balance sheets, and these utility-like characteristics are not priced into banks in the slightest,’ he said.
‘We will see anaemic growth environment for the foreseeable future, so we want consumer cyclicals, banks and retails and defensive value names,’ he said. ‘That has been a different view to most others, as they hold food, beverage, tobacco, chemicals and engineering, which have all done really well.’
Shah took over the Special Situations fund from Anthony Bolton in 2008. The fund has returned 21.1% over five years, beating both the FTSE 100’s 10.6% and FTSE All Share’s 13.2% over the same timeframe.