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Mutual respect

Old Mutual has attracted another top fund manager, Simon Murphy, ex-M&G, who has recently taken over the management of the Old Mutual UK select equity fund.

While he was managing the M&G UK growth fund from April 2004 to November 2007, the fund delivered returns to investors of 74.7 per cent against an average return of 57.8 per cent for the peer group.

Murphy has entirely revamped the portfolio and has trimmed it down to about 40 stocks.

While the stockmarket is likely to continue on a rollercoaster ride, I believe it is much more sensible to stay in the market, particularly as it is still well below its high, and invest with good managers such as Murphy.

He believes, quite rightly, that corporate balance sheets remain generally healthy and are supported by good dividend growth and are now at sensible valuation levels across much of the market. Recent cuts in interest rates will help, too.

Murphy is currently positive on oil and gas and basic material stocks, where he invested almost a third of the fund, and prefers oil services to oil majors. The fund is also overweight in support services and defence which have sufficiently strong pricing power to continue to grow earnings and dividends in an economic slowdown.

He is much underweight in sectors affected by the credit crunch such as consumer services, housebuilders, retail and most financials but some such as Intermediate Capital, a medium-sized finance and fund management group, as well as leading alternative investment provider Man Group and Royal Sun Alliance are attractive at current levels.

I believe that this fund should be a top performer over the next year or two and I recommend it for all growth investors.


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