Neptune’s Alexander bolsters energy position

Neptune’s Ted Alexander has moved from an underweight to a neutral position in energy in his £40m UK Equity fund since the end of last year.

He has increased his energy position from 11.8% to 17.5% since 2010, when the firm’s forecasts for the sector were less bullish than consensus. Unforeseen circumstances, however, such as the Egypt crisis, have helped bolster energy prices, prompting Alexander to increase exposure.

The firm forecast the oil price would probably stay within the $80-$90 range, but oil surged above $90 in December and broke through the $100 mark in January. The underweight to energy was a major cause of the fund’s underperformance in the last four months. “Energy was an area we really got wrong in Q4,” Alexander says.

“Once oil broke out of that $80-$90 range, we thought it would be quite stable so we moved that energy position into neutral.”

The fund was also underweight financials at the end of 2010, but Alexander has taken this position from 16.9% to 19%, bringing in Barclays, for example.

Industrials was another underweight at 8.8%, which the manager has increased to 11.3%.

Alexander funded these changes by cutting back weightings in utilities, consumer staples, and healthcare.

“Looking at the performance of different sectors this year so far, the negative performance has been in staples, healthcare and utilities,” says Alexander.

“The most positive performance has been in financials, and although the fund is still underweight, the position is being built up. Telco is another good performer in which we are neutral, and IT has also been strong.”

Conversely, materials, at 17.4% of the fund, has been the most disappointing sector in terms of performance. “Having a larger overweight to materials has been a drag on performance so far this year,” says Alexander.

However, he believes this underperformance will be a “short-term blip” amid a long-term success story, as demand for commodities in general is strengthening, particularly in the emerging markets.