Speaking at the Morningstar Conference last week, Shah said that given what has happened in the market in the past six to seven weeks, he would expect there to be a market correction of 8 to 10 per cent, which he said would be another indicator for him to go into areas that he has heavily invested in already.
He said: “I am aware that some areas like financials and consumer cyclicals have risen very quickly and at the margin I have been taking some money off the table. In the past few weeks, I have invested more aggressively in companies like AstraZeneca and GlaxoSmithKline.”
Shah said he still sits in the optimistic camp, as indicated by the fund’s overweights to financials and consumer discretionary, but he believes that the recovery will take time.
He said: “I am not in the camp that we are off to the races and that we are in a V-shaped-type of recovery. I do not think things will go up in a straight line as there will be setbacks, which I will look at to further re-orientate my thinking.”
Shah also revealed that 20 per cent of the £1.95bn UK special situations fund’s outperformance in 2008 was thanks to the use of derivatives.
Shah said: “I have also shorted 10 to 15 individual stocks, accounting for 5 per cent of my portfolio, but I am struggling to find many opportunities today compared with 12 to 18 months ago.”