How Bill Mott is bracing for years of 'anaemic' UK growth

The UK is set to experience many years of ‘very anaemic growth’ as the economy rebalances, although there are attractive opportunities to be found in the defensive sector, according to PSigma’s Bill Mott.

The manager of the £359 million PSigma Income fund said the UK is in a ‘difficult’ environment and is typical of what is happening globally, in terms of economic rebalancing.

He said: ‘The UK is condemned to a multi-year period of very anaemic growth as the economy rebalances.’

He added: ‘If we look at the crash four years ago, then the UK recovery was modest compared to the kitchen sink the authorities threw at the economy to avoid a 30’s style depression.’

Although interest rates were set at near zero percent, and quantitative easing was instigated, Mott said the recovery we have seen ‘has been pretty poor’ relative to the action taken.

However, there are still pockets of attractive investments, with Mott saying defensive sectors will be further re-rated.

‘There are tremendous opportunities in defensive stocks, as they are economically insensitive equities yielding significantly more than UK bonds and cash,’ said Mott. ‘These include pharmaceuticals, utilities, tobacco and telecoms.’

Mott’s fund has around 19% in pharmaceuticals, with most of the companies yielding between 4.5% and 6% a year.

He said the pharmaceutical sector is ‘where tobacco was 10 years ago’ and that the industry is being priced as if it will never find a new drug.

The biggest overweight in the fund is GlaxoSmithKline, which is yielding double that of 10-year UK government bonds currently hovering around 2%.