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Bill Mott: the four themes driving PSigma Income
by James Phillipps on Jul 25, 2012 at 00:01
PSigma Income fund manager Bill Mott believes there is a 60% probability that the global economy will ‘muddle through’ the current crisis as he forecasts a protracted period of anaemic growth.
He says there is a 25% chance of inflation spiking as policy-makers ‘oversteer the ship’ in an attempt to avoid a Japan-style deflationary environment, which he ranks as a 15% risk.
Against this backdrop he is continuing to favour large cap defensives, which have fallen out of favour in recent months as last year’s underperformers, small caps and cyclicals, outperformed in the first half of the year.
‘The best we thing we can hope for is anaemic growth,’ he says. ‘The imbalances of the global economy mean it is simply impossible for us to see a synchronised recovery – at least without a significant burst of inflation – so we are sticking with our overall cautious view.’
Mott is playing four key themes in his £385.7 million fund in the face of faltering growth.
Mott says a number of drivers will power the performance of the pharmaceutical sector over the coming years and he is more than double weight the index at 17.4% compared to the FTSE’s 7.4%.
‘Not only is this sector relatively immune to overall economic activity, but we think we are at an inflection point in how the industry is thinking about returns on the investments they make,’ he says. ‘Also, the sector is now being priced as if new product development is going to be extremely scarce, but that progress in biologics means there are actually exciting prospects for new therapies.’
‘We have also been taking the opportunity to build a position in the UK’s Shire Pharmaceuticals on recent weakness and we now have a 0.6% holding,’ Mott says.
‘As we’ve said before, we see pharmaceuticals as the “new tobacco” and this should herald a multi-year period of good returns for investors.
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Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.