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Funds selling defensives to pick up on market rally

Fund managers have started to scale down exposure to defensive stocks in a bid to tap into the recent rally in markets, according to research by Financial Express.

The figures show that AstraZeneca was the most widely sold stock by fund managers in April, having been taken out of the top 10 holdings across a number of funds. Other defensives such as GlaxoSmithKline, Pfizer, Imperial Tobacco Group and E.ON were also widely sold.

Financial Express Research analyst Harpreet Sajjan says the fact that the UK smaller companies sector topped performance tables this month – producing an average fund return of 14 per cent – means that it is no surprise to see fund managers favouring cyclical stocks rather than being left lagging behind in terms of performance.

He says: “UBS UK equity income, for example, holds AstraZeneca as its number one stock at 7.4 per cent of total assets under management.

“The fund also holds high inclusions of GlaxoSmithKline and Imperial Tobacco Group with respective weights of 6.6 per cent and 5 per cent, thus clearly representing a defensive portfolio.

“When looking at the fund’s one-month return of 2.1 per cent, it lagged behind that of the average fund in the sector which produced 5.7 per cent over the same period.”

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