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Expect a bumpy ride, says Lyttleton

UK dynamic manager hoards cash

Black Rock Merrill Lynch UK fund manager Mark Lyttle- ton is warning investors to expect short-term volatility in stockmarkets.

Lyttleton, who runs the UK dynamic and UK funds, says he used the recent market correction to increase his exposure to some stocks but is holding a higher than normal level of cash because of his short-term concerns.

He says: “I am slightly cautious on a short-term basis but I do not believe people should invest for the short term. I am holding 4 per cent in cash, which is slightly higher than normal, and just waiting for further opportunities to arrive.”

Lyttleton says although changes to the portfolios of the 1bn UK dynamic and 380m UK funds have been relatively minor in the past few weeks, he has bought small stakes in oil firms Burren Energy and BG Group and construction firm John Laing.

He says a general theme he is playing in the 46-stock UK dynamic and 54-stock UK funds is investing in companies that have relatively low exposure to any US or Asian consumer slowdown. Lyttleton also heads the group’s transport sector research but is about to move over to coordinate research on food processing stocks.

Both his long-only funds have recently been upgraded to AAA ratings by Standard & Poor’s and Lyttleton says the UK fund has slightly outperformed the UK dynamic fund over the last 12 monthsLyttleton says: “I run it as a low-risk, low-volatility UK equity product. It has outperformed in nine of the 10 mon- ths this year, returning aro- und 9 per cent. When the market went down by 5 per cent in May, the fund was down by just over 1 per cent.”

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