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Peformance review: Walker Crips turns bearish on UK equities
on Jan 30, 2014 at 10:24
Chris Kitchenham, head of Walker Crips Investment Management’s private client unit, has turned bearish on UK equities after strong performance from the firm’s managed intermediate portfolio large cap allocation.
‘While the IMF has increased its GDP growth forecast for 2014 to 1.9%, we view this as a temporary phenomenon as deficit reduction and austerity will continue to bite the UK consumer over the next few years,’ he said. ‘The recovery is not in manufacturing and only partially in construction and the “consumer led” recovery is not sustainable.’
While Kitchenham holds 21.5% directly in large caps, such as BP and GlaxoSmithKline, he also has a 1.5% allocation to the Franklin UK Smaller Companies fund, run by Citywire AA-rated duo Mark Hall and Paul Spencer.
Although still bullish on US equities, Kitchenham has taken some profits and moved his exposure down to 8.5% over the last six months.
Some proceeds have been recycled into European equities, with Kitchenham recently buying into A-rated Feras Al-Chalabi’s Odey Continental European fund, which now sits alongside his existing position in the Fidelity European Values trust.
‘The key signal there of a turning point on the euro is that bond rates in fringe countries such as Spain, Italy and Portugal have started to fall after a peak last year,’ Kitchenham said. ‘There is a sense a recovery is taking hold.’
The Odey fund is a more ‘go-go’ allocation, he said, while the Fidelity trust is ‘a large cap boring investment trust sitting at a discount to its asset value invested in the who’s who of European large caps, which is where you want to be’.
Additionally, Kitchenham is positive on Japan, where he upped his allocation to 4.5%, backing Abenomics to kickstart the economy.
‘We see this pushing the market higher, but with the possibility of losing money through a weakening yen. We have therefore purchased Polar Japan [run by AA-rated duo James Salter and Gerard Cawley], hedged back into sterling. This is an unusual situation for us to give away part of the diversification, but we see this as a unique situation,’ he said.
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