View the article online at http://citywire.co.uk/wealth-manager/article/a762260
Franklin’s Russon benefits from retail and favours pharma
by Eleanor Lawrie on Jul 17, 2014 at 14:41
Russon joined Franklin Templeton last April from Newton Investment Management, where he ran the Newton UK Opportunities fund. He has been co-managing the £93 million Franklin UK Opportunities fund for around a year, which was renamed from the Franklin UK Select Growth fund on 30 September 2013.
Over 12 months to the end of June the fund returned 12.4%, narrowly underperforming the Citywire UK Equity sector return of 13.6%.
It is highly concentrated into just 37 stocks and each ‘has a meaningful impact on performance’.
To mitigate macro risks, a large chunk of the portfolio is made up of globally diversified stocks in the pharmaceutical and utilities sectors. These are not particularly sensitive to what the domestic economy is doing, and are generally cheaper than growth stocks, he said.
‘Our focus is on non-economically sensitive companies with balance sheets that are not too highly geared, so they can ride out more difficult environments,’ Russon said.
‘If you look at cyclical areas, people are paying a higher multiple for future growth. Obviously, if that growth does not transpire, you have risks of downgrades, which are less of a risk in defensive parts of the market.’
Last year, the fund experienced the perils of holding politically sensitive stocks when Centrica, the parent company of British Gas, was hit by the fallout from political posturing over energy prices.
‘We got caught out by the political moves and Labour’s pledge to freeze energy prices. The political risk was detrimental to the portfolio,’ Russon said.
‘The position was reduced to mitigate the impact, but I still think there is value in the shares. They just have to ride out the political environment in the short term.’
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