Graham French, manager of the £4.28bn M&G Global Basics fund, has moved defensively in recent months on concerns over a slowdown in global growth.
French built up his fund's cash weighting to 9% by the end of June and has continued to allocate to established cash generative consumer staples at the expense of the portfolio's cyclical names.
"Concerns about global growth have put equity valuations under renewed pressure, and I am cautious on the outlook for the economy and financial markets," French says.
"I remain cautious but optimistic on the prospects for the world's developing economies, due largely to the impact that seismic structural and demographic shifts are having on the outlook for consumer spending on a wide range of ‘basic' goods and services."
While French is positive on the structural dynamics and rising wealth in emerging markets, Global Basics has limited direct exposure to emerging market-listed stocks.
"As a valuation-focused fund manager, I continue to be wary of overpaying for even the most compelling long-term story," French says.
"Less than 15% of the portfolio was invested in companies listed in Asia ex Japan, Latin America and EMEA at the end of the quarter, and most of these holdings were in the ‘developed' Singapore and Hong Kong markets.
"I prefer, in general, to invest in Western companies whose exposure to the structural trends taking place in faster-growing developing markets remains significantly under-appreciated."
The manager introduced a position in Nestlé during the month, a stock French says is benefiting from the rising wealth and changing consumer spending patterns across the emerging markets.
French also added to the fund's stakes in defensive UK-listed stocks PZ Cussons and G4S.
Another new position added in June was Canada-based precious metals miner Centerra Gold, which has operations in Central Asia and the former Soviet Union.
"Centerra's management team is focused on developing its reserves and production capabilities through exploration and the expansion of existing mines," he says.
"Furthermore, the company has no significant debt and already generates strong and sustainable cashflows."
To fund the positions, French trimmed the fund's holdings in cyclical names which have performed very well over the past year - including Johnson Matthey, Australian recycler Sims Metal Management and French chemicals producer Arkema.
He also exited a position in Qinetiq, as well as US-listed wine producer Constellation Brands and Schnitzer Steel.
