The Papua New Guinea stock catching UK star Spencer's eye

Paul Spencer, manager of the Franklin UK Mid Cap fund, has initiated a holding in New Britain Palm Oil – the fund’s first ever investment outside the FTSE 250.

Papua New Guinea-based New Britain Palm Oil, dual-listed on the London Stock Exchange and PNG's Port Moresby Stock Exchange, is excluded from the FTSE indices due to its overseas base and the fact one shareholder, Malaysian peer Kulim, owns a 51% stake.

"We bought it earlier this year and it is a particularly attractive business. Size-wise it is in the right space at a market cap of £1.3bn," Spencer said.

"There is nothing else in midcap that gives me exposure to growth in soft commodities in this way."

The stock has fallen during the sell-off, in line with most equities, and is currently down 8.9% year to date.

However, in the last five years it is up 135%.

The stock is one of just three Spencer has added to his portfolio in the past six months, in addition to just two sales, as the manager looks to add a degree of cyclicality to the portfolio.

UK Mid Cap is top decile in the IMA UK All Companies sector over the three years to 21 October, returning 90.4% against a sector average of 43.6%.

"I have sold Dignity, the UK's largest funeral home, which has held up remarkably well, and bought Howden. The value lies in economically sensitive stocks rather than the defensives, which held up well and were re-rated," he said.

Spencer also added to the likes of Wood Group, DS Smith and Domino Printing on weakness at the end of September, but said the fund has had a "very high level of consistency" over the past six months.

"In these times you need to have a portfolio that does not need to be chopped and changed around. At the moment my portfolio is still split 50/50 between domestic stocks and those which derive their earnings from overseas, and there is nothing persuading me I need to change that."

Accordingly, the number of holdings in the mid-cap fund - 38 - is less than is typical.

"The number of holdings is at the lower end of what I would consider normal; 45 is normally where I would expect it to be. But when I have been looking at new investments I have felt the best use of the money in the portfolio was to add to the holdings we have had," Spencer said.