Things will not get better or worse, they will become different”. This is a favourite saying of Nigel Thomas, manager of the Axa Framlington UK select opportunities fund. I only wrote about his fund in this column last summer but I make no apologies for looking at it again.
Over the past six months, the economic outlook in the US has improved, China’s economic growth has slowed, but a hard landing looks less likely and the ECB has made progress in providing funding to banks.
Nevertheless, Greek bailout talks are ongoing and economic growth across Europe and the UK is likely to remain subdued. On balance then, I do not think thing have become better or worse but they are different.
Fortunately, in Nigel Thomas, you have one of the most experienced fund managers in the UK to guide you through an uncertain and ever-changing environment. His record can be traced back to the 1980s, yet he remains less well known than managers such as Neil Woodford of Invesco Perpetual.
Mr Thomas’s style is buy and hold in a true sense and turnover on the fund tends to be low – around 10 per cent a year. This is a multi-cap portfolio, giving him free rein to apply his stockpicking skills to the entire UK stock market. He seems to have a talent for spotting promising smaller companies that could one day become much bigger.
Over the years, he has had great success from Imagination Technology (formerly Video Logic). He admits the company has had its challenges but his faith has paid off and he believes it is soon likely to be a contender to enter the FTSE 100. I believe it is this vision that sets him apart from many other fund managers.
His weighting in FTSE 100 companies is currently higher than it has been for some time, not because he is seeking safety in large caps, but because12 per cent of his stocks were promoted from the FTSE 250 to the FTSE 100 over the past year. This in itself tells you something about his stockpicking skills.
In line with his theory that things will become different, he looks for companies set to benefit from long-term global trends. Increasing urbanisation in emerging markets and the development of infrastructure to support it is one such theme while the increasing importance of energy is another.
Companies exploring for oil and gas among shale fields and those providing the technology to extract resources from the ground could be key beneficiaries.
He holds exploration and production company BG Group as well as Weir Group and Filtrona which provide industrial equipment and technology.
Mr Thomas is less keen on mining companies, selecting his exposure carefully as he does not believe corporate governance is robust enough with some companies.
He is also well known for saying “I won’t buy things that will fly or float,” so don’t expect to see airline or cruise companies in the portfolio.
Overall, I find him relatively bullish. He acknowledges the debt problem in Europe and the UK but points out: “It is the duration, not the level of debt that matters.”
Simply put, average maturity on UK government debt is around 13 years, while it is only four years for European governments. Therefore, the UK has time on its side to organise and then pay down debt while Europe doesn’t.
Mr Thomas has a good team of UK fund managers, with excellent access to company management. He believes patience will be rewarded and, just to reassert this fact, he has 70 per cent of his own pension invested in the fund. His interests are therefore very much aligned with investors.
Maybe we should take a leaf out of his book – stop worrying about the wider economic issues and just back an experienced fund manager with a highly enviable track record.
Mark Dampier is head of research at Hargreaves Lansdown