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Buxton backing small cap to top Skandia best ideas fund

Schroder UK fund manager Richard Buxton says he is unlikely to be the top-performing manager of the 10 chosen to contribute to the Skandia UK best ideas fund.

Buxton, who runs Schroder alpha plus, picked nine large cap and one mid-cap stock for the Skandia portfolio but is backing a small cap manager to be the best performer.

Buxton currently holds 32 stocks in his UK alpha fund and contributes 20 stocks to the 50 stocks held in the special situations fund he runs with colleague and Schroder mid 250 fund manager Andy Brough for Norwich Union.

He says: “Just to narrow it down to 10 stocks for the Skandia fund was very difficult and involved a lot of head- scratching.

“I would not be phased if I am not best performer on the Skandia fund because they know how I invest but I would be surprised if I was the best- performing manager and would expect a small cap manager to achieve best results.”

Buxton provides the large cap stocks for NU special sits while Brough provides the small and mid-cap content. He says the pair “gatecrashed” the recruitment process by pitching their investment idea to NU at a late stage when the group had already drawn up a list of managers.

Buxton is upbeat about the prospect for large caps and has slightly increased the Schroder alpha plus fund’s blue-chip weighting to over 80 per cent and has decreased mid-cap exposure because he believes returns in the sector over the next 12 months will be disappointing.

The number of oil and mining stocks in the fund is also gradually being increased and are back up to 25 per cent of the fund after peaking at 30 per cent before the market correction earlier this year.

Buxton says: “Oil shares never rose sufficiently to represent when the price was $73 per barrel, which is bizarre. Now the oil price has stabil-ised at around $40-$50 and people know it will not fall back further so these stocks look cheap.”

He recently bought back into Vodafone at 116p because he felt it was undervalued and has recently bought back into Unilever and BT. He is also gently adding to his position in ITV.

Buxton disagrees with the recent consensus that mega-caps are too big to be acquired and cites his recent purchase of Unilever as an example.

He says: “Three or four private equity groups can get together to make a bid so I don’t think it is impossible. I think the attitude that you should be underweight in mega caps is a dangerous one and people’s memories of the bear market are short.”

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