The fund in question was the Fidelity Special Situations fund, managed by Sanjeev Shah, which moved from a defensive stance going into the second half of 2008 to a more cyclical exposure before the rally in the second quarter of 2009. This allowed him to avoid the major pitfalls during the stockmarket collapse of 2008, while allowing him to participate in the equity rally since March.
Shah’s success in one of the most challenging markets in a generation will give investors confidence that he is a worthy successor to Anthony Bolton, one of the industry’s best known fund managers who stepped down from the fund at the end of 2007.
Elsewhere in the sector, S&P said fund managers see British stockmarkets as still sensitive to macroeconomic factors which are overshadowing analyses of company fundamentals.
“More positive factors such as low interest rates are offset by the potential inflationary impact of a weak currency, fragile consumer confidence and rising levels of unemployment,” said Susan Sworn, a lead analyst at S&P Fund Services. “Next year there is the added uncertainty of the policy outcome after the 2010 election.”
The volatility of macroeconomic sentiment makes the environment particularly problematic for genuine stockpickers, as top-down sentiment can cause share prices to drop irrespective of strong stock-specific fundamentals.
Unsurprisingly, views on the immediate outlook are mixed. Ian McVeigh, the manager of the Jupiter UK Growth fund, stands out as having an out-and-out bullish stance, saying that the rally has further to go, while Standard Life’s view on Britain is guardedly optimistic.
The more contrarian investors, having seen their cyclical holdings reach their two to three year targets in a matter of weeks, are voicing concerns that stocks are pricing in full earnings recovery, and are revisiting, on valuation grounds, some of the more defensive stocks left adrift by the rally.
At the other end of the scale, the more defensively-oriented funds that retained their quality stance have underperformed in the current equity rally. The managers, however, are convinced that the market will, at some stage, refocus on fundamentals.
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