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Brown Shipley’s Botham: why it will be a struggle to beat 10% in 2014

by Elsa Buchanan on Jan 28, 2014 at 14:49

‘I’ve been more bullish this year, especially on commercial, industrial and office buildings. The London thing is already starting to ripple out to the rest of the country.’

He has increased his allocation to absolute return funds, holding the Henderson UK Absolute Return fund managed by AAA-rated Ben Wallace and Luke Newman, and Ruffer Total Return .

Performance

Over 12 months, the group’s Balanced portfolio, which has a 61% allocation to equities, has returned 10.15%. It outperformed the ARC Balanced Asset PCI benchmark (40-60% in equity), which rose 8.8% over the same period, but underperformed the ARC Steady Growth PCI (60-80% in equity), up 12.5%.

Botham’s early call into UK small and mid caps helped drive performance, boosted by a 44.25% return from the Chelverton UK Equity Income fund run by AAA-rated duo David Taylor and David Horner. He also points to the Franklin UK Mid Cap fund, managed by AA-rated Paul Spencer and A-rated Mark Hall, as a top performer, followed by the sterling hedged JPM Japan fund.

Botham acknowledges holding direct equity in certain stocks with heavy emerging market exposure, such as Unilever and Diageo, hampered performance. ‘They are loved by private clients for the income but fell out of favour last year and lagged the market by a mile.’

In 2014, he expects returns of 7-8% in the US, mid-teens for Japan and a targeted 10% for the UK and Europe. ‘In Japan, growth will almost entirely be capital because there is not that much income but it is better than it was; and recovery is still to come through in Europe.’

He says UK performance will be driven by growth large caps, highlighting Easyjet, Whitbread, Johnson Matthey and Prudential.

He believes it is too late to sell out of emerging markets but adds they could turn around because a lot of the risk, such as the impact of QE tapering, is already priced in.

Buy: Growth large cap equities

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