Stockmarket volatility is likely to continue in the short term but the recent FTSE falls are throwing up excellent buying opportunities, say leading fund managers.
PSigma income fund manager Bill Mott says he is finding “deep value” in the worst-hit sectors – banks and life companies – following the recent sell-off on concerns over contagion from the US sub-prime mortgage crisis. He says the market is undergoing a “financial convulsion” that should not result in major economic dislocation.
Fidelity UK special situations fund manager Anthony Bolton warns volatility will continue in the short term but says he is using the stockmarket falls as an opportunity to top up selected holdings.
He says a correction is natural following a four-year bull run and notes that corporate balance sheets remain generally strong.
Bolton says: “It remains to be seen if the current financial crisis we are witnessing affects an otherwise robust global economic environment.”
Schroders head of UK equities Richard Buxton considers long-term investors will benefit from opportunities arising from the fall in excess risk appetite while Gartmore UK focus fund co-manager Simon King brands the sell-off “indiscriminate”.
Mott says he is increasing his focus on a barbell approach and is 6 per cent overweight in mega caps, saying significant portions of inflows into the fund are being used to maintain an overweight position in financials. He is also buying high-growth stocks as part of this strategy and says many have been de-rated to price in a future cyclical downturn but he sees consistent growth ahead.
Mott says: “Throughout August, we have been putting in place what we believe to be some rewarding investments at what appear to us to be stunningly attractive prices. It is a very good time to be busy in the market for 55-year-old fund managers.”
Buxton says: “The worst may not be behind us but the fact that recent events have blown off some of the excess risk appetite in credit markets can only be a healthy thing for the market. As long-term investors, we have therefore been happy to exploit the considerable opportunities that this weakness has so far created.”
King says: “In our view, the recent sell-off has been indiscriminate and has created some attractive investment opportunities.”