New Star UK alpha fund manager Tim Steer believes that if he had maintained the fund’s mid-cap exposure at around 80 per cent since the funds’ launch, it would have achieved greater outperformance.
The fund has returned 89.3 per cent after five years compared with an all-companies sector average of 46.6 per cent.
Steer says the five-year-old fund had been taking profits and increasing its weightings in blue chips while lowering its mid-cap exposure from 80 to 65 per cent. But he now thinks mid caps offer better value, primarily due to continued takeover activity, and is actively increasing mid-cap exposure again.
Steer says the main themes are private finance initiative companies, engineering and defence stocks and he has recently increased his hold-ings in Serco, Balfour Beatty and Alfred McAlpine and invested in PFI fund Babcock and Brown. Balfour Beattie and Alfred McAlpine are among his top five holdings, along with SIG, Rotork and Rolls-Royce.
Steer wants to recruit an assistant fund manager and says his two dealers, Mike Harrison and Mark Fotiades, deserve much of the credit for the fund’s outperformance.
Biggest performers over the five years include Workspace, which has returned 160 per cent, and security stock Det-ica, which has achieved 126 per cent growth.
He says: “I should have stayed more in the FTSE 250 because I would have bene-fited from its performance. Although I did continue my themes into the FTSE 100, buying into defence stocks and property which have done OK, the FTSE 250 has done better and I am increasing it again.
“There are a lot more consolidation sectors in the mid caps. Executives are more clued up and most are UK-focused.”