Harry Nimmo, manager of the £1bn Standard Life UK Smaller Companies fund, has more than doubled his exposure to real estate companies, after five years of being mostly invested out of the sector.
Nimmo has increased his weighting to the sector from 1.5 per cent to 4 per cent of the portfolio, over the last month. To achieve this he has bought 1 per cent position in the property developer Quintain Estates & Development and another 1 per cent in real estate investment trust Workspace.
His remaining exposure is in Shaftesbury, the property investment company that specialises in the West End, which he already held in the fund.
He says: “We have been tentatively buying back into real estate companies, where we have not been really invested in since early 2007.” says Nimmo.
He adds: “There has been a precipitous decline in real estate companies since 2007. They have recovered a little and we have seen a few real estate companies to appear in our matrix through our screening process. A lot of the balance sheet repair has been done and these companies have raised a lot of money.
“The companies have to be south-east of England orientated, because that is where the vibrancy in the economy is. London, for example, has attracted a lot of capital flight from south Europe, the peripheries. We are not interested in the rest of the country.”
Nimmo also holds the US housebuilder in the Berkeley Group in the Standard Life Global Smaller Companies fund that he also manages.
Meanwhile in the UK Smaller Companies fund Nimmo has been reducing engineers on the basis that he says the mining super cycle is over.
He says: “Quite a lot of these engineering companies depend on mining and extractive industries to grow their businesses and that has been fantastic for them over the last seven years.
“However, the mining supercycle is over and we are going to be in a long barren period on the back of slowing China growth. It could last for decades. If you build infrastructure, you are going to need lots of steel for example. The peak of the investment in China in these things has reached its peak.
In the third quarter of this year, Nimmo sold a 2.5 per cent position engineering company Spirax Sarco and reduced his position in Rotork, taking it from 2.5 per cent to 1.8 per cent.