Old Mutual's Simon Murphy has begun introducing food retailers into his fund, believing the sector is well positioned to benefit from food price inflation.
Recent figures from the Office for National Statistics showed a 3.4% increase in the cost of food over the last year.
This looks set to continue as food prices have been hit by events such as adverse weather conditions and Russia's recent export ban on wheat.
The manager of the £99m UK Select Equity fund has built a 1.8% position in Sainsbury's and a 1.7% holding in cash and carry operator Booker.
"One of the themes which is starting to come through is food price inflation," he says.
"Food retailers tend to perform well when there is inflation as they are able to maintain pricing power. It tends to be the customer and the suppliers which get squeezed on price.
"Sainsbury's CEO Justin King has done a good job of realigning the business and we see a decent growth pipeline coming through," he adds.
Elsewhere, the manager has been steadily increasing his exposure to banking names, taking them up to 13%, more than half the fund's 21% financial exposure. Holdings include HSBC, Lloyds TSB, Barclays, and Standard Chartered.
"I was very cautious on the recovery in banks last year as although the operating profits were good, there was the potential for further toxic assets on their balance sheets," he says.
"The balance sheets are much healthier now and I am more enthused about the banks' ability to provide a good return on equity."
Murphy also owns Jupiter Asset Management, reflecting his positive view on the outlook for equities.
"You do not get much more of a purer play on equities than an asset manager," he says.
"I always felt this year would be a constant battle between corporate data and the macro picture and this is what we are seeing," he says.
"But I remain convinced equities will outperform over the longer term. Corporates have got strong balance sheets, M&A activity is picking up and equities are on historically low valuations."
