New Star select opportunities fund manager Patrick Evershed is predicting an economic slowdown and is cutting back on retailers for the 126m fund.
Evershed believes that consumers in the UK are spending more than they earn and that this will eventually push up taxation.
He is preparing for cyclical stocks to be hit heavily while the overall economy should not suffer too badly and recover in time as consumer spending is cut back sharply to begin with.
As well as cutting back on retailers in anticipation of consumer spending dropping, Evershed is also cutting back on housebuilders as the housing market shows a slowdown in sales. Latest figures from Nationwide Building Society show that house prices fell by 0.4 per cent last month.
Evershed has 8 per cent of his portfolio in energy stocks and he feels that technologies remain good value since they have huge upside potential. Biotechnology also remains favourable as there is a risk/reward level that is quite high and a correct call could give enormous potential uplift.
Evershed says: “I firmly believe that we are heading towards an economic slowdown. People are living well beyond their means and the Government has a huge deficit at a time in the economic cycle when there should be a surplus.
“Government expenditure will have to be reduced and taxes will have to rise in order to counteract this shortfall. The economy, however, should not take too much of a hit but I expect cyclical stocks to be hit quite aggressively and as a result I have red-uced the number of retailers and housebuilders.
“I am positioning my portfolio towards stocks that should not be affected by a slowdown in the economy.”