Ignis’ Holden sells out of financials and cuts holdings in UK Focus fund overhaul

Mark Holden has revamped the Ignis UK Focus fund since taking over last month by cutting all financials exposure, reducing the number of holdings and increasing cash.

Holden was hired from wealth management firm Vestra Wealth to improve the £89m fund’s bottom quartile performance.

The manager took over from Ralph Brook-Fox, who will continue to manage Ignis’ Balanced Growth fund.

Although the portfolio he inherited performed well during the October rally, Holden wanted to make the fund higher conviction and with a defensive bias for the current climate.

Holden said: “I would have liked a month to look at the fund, a month to think about possible changes and another month to implement those but the markets have not afforded me that luxury.

“With so much volatility it was required of me to get on and do something.”

Previously the fund had a bias towards financials and industrials, but Holden aggressively reduced these positions after taking profits during the short-lived rally.

Exposure to banks and insurance companies was 17.5%  but this was cut to zero on Holden’s negative view of the sector.

“I think the issues in Europe will affect financial institutions far more severely than the markets believe.

“The re-capitalisation of the banks will have to be taken out of the care capital of their businesses,” he said.

“When things get better they will not have a capital base to generate an uplift in earnings and make an adequate return on equity. I was very comfortable coming out of financials.”

Around a quarter of the portfolio was in industrials but this has now been reduced to 10%.

“It is still an area we like and I am happy to remain overweight but less so than before. Industrials bounced very strongly in the rally so we became focused on names we liked.”

Holden reinvested the proceeds into resources stocks including BP which previously had not been included in the fund. 

The oil giant now makes up 5.5% of the portfolio as Holden said there is
an “increasing absence of bad news surrounding the company”.

The manager added BP had been given back its licence to drill and explore for oil which is key to future growth.

The fund’s largest position is now Rockhopper, the oil and gas exploration company focused in the Falklands.

Overall the number of stocks in the fund was reduced from 33 to 25 and exposure to FTSE 100 stocks increased from 74% to 84%. Cash has been increased from zero to 9%.

“There is so much volatility in the markets and the cash buffer helps reduce that volatility. I also wanted to be in a position to take advantage of a pull back in the markets post the European summit,” Holden said.

Turnover has clearly been high since Holden took the reins of the fund on 1 October but the manager said he is now happy with the portfolio and will just trade around the edges.

He hopes the changes will be enough to boost performance and differentiate the UK Focus fund from a crowded peer group.

“In a sector of 300 funds, we cannot be a ‘me-too’ fund. We have taken the number of stocks down to 25 so this puts us firmly at the high conviction end.”