SocGen Asset Management has established the UK special situations fund, a unit trust that invests in a portfolio of between 40 and 80 stocks.
The portfolio will initially consist of small-to mid-cap stocks but could also invest in large caps if conditions in the UK equity market change.
Former UBS fund managers Hari Sandhu and Hugh Sergeant will manage the fund. They worked together at UBS for five years before joining SocGen in 2002.
With the new fund, Sandhu and Sergeant will select stocks they think offer the best growth opportunities over the next two to three years. Examples of holdings include the media company Granada and Intercare, which provides outsourcing services to the pharmaceutical industry.
The portfolio will be overweight in the media sector and other sectors which have fallen out of favour, such as software and telecommunications. These sectors have been reassessed by fund managers and the share prices of the stronger stocks within those sectors have fallen alongside the weaker companies, so they are cheap.
The fund managers expect the demand for outsourcing to continue so they will invest in this sector, along with transport. Underweight positions will be taken on sectors such as tobacco and utilities, which are perceived as less risky. Sandhu and Sargeant feel they are overrated, and companies are under pressure to maintain profit margins.
This fund could suit investors who are looking for greater growth potential than a core UK growth fund. But because it invests small to mid caps in out of favour sectors, the risks are likely to be high.
According to Standard and Poor's the SocGen UK growth fund is ranked 173 out of 244 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to December 23, 2002.