In favour / out of favour – Premier Miton Diversified Funds

Neil Birrell

Premier Miton's Chief Investment Officer

Neil Birrell, Premier Miton’s Chief Investment Officer and manager of the Diversified Fund range explains why UK equities can provide exciting growth opportunities, even when the economic backdrop may not be that exciting!

The economic data coming out in the UK recently has not made great reading; growth is slowing, inflation is rampant and the Bank of England are struggling to balance the equation. You would think that would mean that the UK equity market would be one to avoid as a result. A large part of my job as the fund manager of the Diversified funds is to talk to the managers of the underlying asset classes on their views and about the portfolios they are managing.

In conversations with Benji Dawes and Jon Hudson, who manage the UK equity portfolio, it was clear that their view of the prospects for the companies they hold was quite different to what you would think just looking at the macro environment.

It’s worth remembering we don’t hold any UK equity index. We invest in their carefully selected range of companies. Rather than me expanding on our positive view for that element of the funds, I have included wording from Benji Dawes below.

In favour; UK equities, well, the ones we hold anyway

It is not news to anyone that follows financial markets that the current macroeconomic climate is showing signals, much like Europe’s summer, of having over-heated. The deterioration in forward indicators such as global Purchasing Manager’s Index (PMIs), along with declining book to bill ratios, is creating angst among investment managers already burnt by persistent inflation and unstable geo-politics. Just as they may be applying their sun tan lotion (liberally) to protect from the intensity of the situation on their beach-side loungers in the Mediterranean, they have been increasing portfolio risk management, by increasing levels of cash.

The times they are a changin’. After a decade of low inflation and benign central bank policy, market forecasters now anticipate something in the range of a moderate recession to Armageddon. The UK economy, according to the Bank of England’s latest prognosis, is not immune. It duly reduced expectations for the country’s growth outlook.

Two things strike me about the current market malaise. Firstly, haven’t we (investors) been complaining for a decade that we’ve not had a golden opportunity to “be greedy when others are fearful”, as the sage of Omaha put it in his 1986 Berkshire Hathaway Chairman’s letter? Well then… Secondly, the fortunate thing about an actively managed equity portfolio is that its outlook need not be wedded to the economy. Happily, that is the case for us.

The summer has not heralded much to celebrate in terms of the economic outlook, but our portfolio of UK companies has delivered an upgraded set of financial results, and a strong outlook to boot. Whether it be consumer health and household products giant Reckitt Benckiser, renewable energy provider Drax or data and information services firm Euromoney, our companies have confounded lowly expectations to positively surprise the “market”. The latter is the subject of a bid, which resulted in a sharp jump in the share price.

IG Group, the largest of our UK holdings, delivered solid growth above expectations and guided to double digit top line growth as it sees opportunities to leverage its market leading investment platform internationally and capitalise on the trend towards more self-directed investing. As with all our companies, IG Group has a strong financial position – in fact it is using excess cash for a value accretive share buyback – and will therefore be able to invest ahead of peers, further reinforcing its market share growth prospects.

Out of favour; less

If you have read these notes over the past few months, you will have noted their negative tone. In fact, it has been possible to provide reasons not to invest in any asset class! This has influenced the positioning of the funds.

Whilst the outlook still provides plenty of reasons to be cautious, we are moving through the cycle and there is, in my view anyway, increasing room for optimism. However, it is not having an impact on asset allocation …. yet.

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Risks

The value of investments may fluctuate which will cause fund prices to fall as well as rise and investors may not get back the original amount invested.

Reference to any particular stock does not constitute a recommendation to buy or sell the stock.

Equities (shares) can experience high levels of price fluctuation.

Some of the Diversified funds may experience high volatility due to the composition of the portfolio or the portfolio management techniques used.

Future forecasts are not reliable indictors of future returns.

IMPORTANT INFORMATION:

For Investment Professionals only. No other persons should rely on any information contained in this document.

Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice.

All data is sourced to Premier Miton unless otherwise stated. Persons who do not have professional experience in matters relating to investments should not rely on the content of this document.

For your protection, calls may be monitored and recorded for training and quality assurance purposes.

A free, English language copy of the fund range’s full prospectus, the Key Investor Information Document and Supplementary Information Document are available on the Premier Miton website, or you can request copies by calling us on 01483 306090.

Financial Promotion is issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227.  Both companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE.

007391/190822

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This section of the website and the content it contains is for professional financial advisers only and should not be relied upon, or circulated to, retail clients. Retail clients should refer to the Private Investor's site.

The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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Disclaimer

This section of the website and the content it contains is for retail clients only and by persons who are resident in the United Kingdom [who are not US persons]. Professional advisers should refer to the Professional Advisers site.

The content of the pages of this website is for your general information only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell or purchase shares in the funds or portfolios or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

Website terms of use: Please ensure you have read and accept the full 'website terms of use' before continuing.

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Disclaimer

This section of the website and the content it contains is for professional financial advisers only and should not be relied upon, or circulated to, retail clients. Retail clients should refer to the Private Investor's site.

The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

Website terms of use: Please ensure you have read and accept the full 'website terms of use' before continuing.

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