NEIL CUMMING, manager of PSigma UK Growth fund on UK Growth
Mervyn King has a headache. Forget the ‘Goldilocks’ economy; he cannot work out if the porridge is hot or cold.
The MPC says its central inflation forecast is at risk both to the upside and the downside. However, it does not know which.
A fragile recovery and spare capacity point to the downside, whilst energy prices, weak sterling and VAT increases point to the upside.
So, for now, they are adopting a ‘wait and see’ monetary policy. Likewise, policy predicaments afflict a ‘hot’ Germany (in a ‘cool’ euroland) and the ‘hot and cold’ US.
Following a thematic approach, we are trying to look beyond the current confusion. The PSigma UK Growth fund sees global population growth as a key economic driver, offering companies the chance to deliver secular growth.
Current economic conditions are not the ones in which to be over paying for cyclical growth. Yet many cyclical stocks in our UK universe have performed superbly over the last 18 months and are no longer looking cheap.
Hence, we are attracted to areas such as energy, healthcare, telecoms and education that have the chance to grow reliably in a variety of economic conditions. At present we are finding opportunities across the market capitalisation range, especially amongst stocks with international exposure.
For example, in our portfolio, healthcare GlaxoSmithKline is lowly rated given its growth opportunities, while the smaller BTG is doing a good job of developing its portfolio.
Neil Cumming is manager of PSigma UK Growth fund and deputy to Bill Mott on PSigma Income fund
