First State Investments has established the British mid-cap fund, an Oeic that aims for capital growth by investing in medium-sized companies within the UK.
The fund is part of First State's British range, which consists of three other funds, British smaller companies, British all companies and British opportunities.
The British mid-cap fund will consist of between 60 and 80 stocks and is benchmarked against the FTSE mid-250 ex investment trusts index. This includes companies such as Capital Radio, Manchester United football club and Woolworths, which cover a range of sectors. The fund will limit sector weightings to 30 per cent or 15 per cent more than the benchmark, whichever is higher.
Derek Lygo, the fund manager, will take a bottom-up approach to stockpicking. He will examine each company in relation to its future prospects on a regional and global basis. He will also look at factors such as management teams and balance sheets.
Lygo has been labelled a mid-cap specialist after 18 years experience in fund management, mainly on the institutional side. He joined First State Investments in October 2001, after six years with Dresdner RCM.
The UK economy has remained strong, despite recent difficulties on a global scale, and the budding signs of a recovery may gather pace during the rest of the year. This makes mid-caps a promising area to invest, as they have more growth potential than larger companies without the higher risks of smaller and developing companies. However, this fund may be too racy for some investors, who may prefer to spread the risk across different sized companies.
According to Standard & Poor's, the First State UK all companies fund is ranked 196 out of 242 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to January 18, 2002.