Marlborough UK fund ups emerging market exposure through energy sector

The manager of the Marlborough UK Leading Companies fund has upped his exposure to companies poised to benefit from growing emerging market demand for power.

Richard Hallett, who runs the fund alongside Giles Hargreave, added Essar Energy to the portfolio when the India-focused electricity generator floated in April.

Hallett says: “It is well recognised that in India the infrastructure is failing to meet the demand for electricity and other power, and Essar Energy is one of the beneficiaries of that supply/demand imbalance.”

Essar Energy represents 2.3% of the portfolio and sits alongside another play on energy in emerging economies, Aggreko, which supplies generators to countries where demand for power outstrips the supply provided by local energy infrastructure.

It supplied generators and air-conditioning at all 10 of the World Cup stadium venues in South Africa and is the fund’s largest holding, representing 3.8% of the portfolio.

Hallett has also added BP to the portfolio on its recent weakness. 

“I bought it when it got to the 350p level as I thought the risk/reward profile was starting to look quite interesting,” he says. 

“In the medium term, there is a real chance it could fix the leak in the Gulf of Mexico and there could be a relief rally.” 

In comparison with its benchmark, the Morningstar UK All Companies index, the fund is significantly overweight technology companies, which account for 10% of the portfolio. Imagination Technologies, which makes graphics chips for Apple’s iPhones, is one of its largest holdings at 3.1%. He also owns ARM, a microprocessor designer.  

“I am trying to pick secular growth areas which are not dependent on global growth,” he says. “Smartphones continued to grow throughout the downturn and it is estimated that suppliers will soon not able to sell a phone in the developed world unless it is a smartphone.”

Another holding which Hallett points to as an example of “secular growth” is clothing retailer ASOS, which has seen a 70% increase in its share price in the past three months.

“This company has continued to grow throughout the credit crunch and its last set of results has seen its international expansion accelerating,” Hallett adds.