‘Pubs will bounce back despite a savage recession’

Astring of high-profile managers have left their funds since the start of the year, forcing investors to decide whether to sell out or put their trust – and money – into the hands of new management.

Paul Spencer, veteran manager of the £985m Franklin UK Mid Cap fund, retires this year after 14 years with the firm. Over this time his fund has gained 280pc, while the FTSE 250 index has risen by just 161pc.

His successor, Richard Bullas, tells Telegraph Money which companies he expects to thrive as Britain emerges from recession and why dividend cuts don’t bother him.

WHO IS THE FUND FOR?

It’s for people who want exposure to medium-sized British companies. We believe these firms have more potential to grow than larger ones, but this takes time, so we recommend that people remain invested for five years or more. We hold only the 30 or 40 companies we believe to be the best, so it’s not a fund for people who want exposure to the whole market.

HOW DO YOU PICK STOCKS?

We pick companies we believe will grow the most within three to five years. Companies with a lot of debt are avoided as they can be risky.

We like firms in sectors that are growing quickly and are stable – such as telecommunications, which is getting a lot of investment at the moment. Lastly we look for companies with excellent management teams. This is particularly important for medium-sized companies where the founder still tends to have a great deal of influence over the business.

WHICH STOCKS DO YOU AVOID?

We don’t like firms in declining markets such as some manufacturing or those that rely on high street retail and are struggling to move online.

Fund manager Richard Bullas tells Marianna Hunt which British firms will come out of the Covid crisis stronger

HOW HAVE YOU BEEN MANAGING THE TRANSITION?

Paul and I have been planning for the handover for almost a year. Until June we will be managing everything jointly. From then until he steps down in October I will be leading, but he will be around if we need him.

The fund’s investment style will not change after the handover.

ARE YOU PREPARING FOR A RECESSION?

Yes, and we expect it to be a savage one. We are trying to make sure we are not too exposed to certain sectors or, if we are, that we spread the risk by making sure the companies we hold within those sectors are very different.

Around 40pc of the fund is invested in industrials, but within that we own Bodycote, which provides heat treatments for manufacturing, and Spectris, which makes scientific equipment for academics.

Their customer bases are very different, which hopefully will protect us.

ARE YOU SEEING ANY OPPORTUNITIES IN THE CRISIS?

Absolutely. The share prices of many great companies have dropped dramatically. We’ve already added LondonMetric Property, a logistics company, to the portfolio since coronavirus hit Britain. We will likely add more stocks as well.

We also see potential in consumer

stocks, food retailers, travel and leisure. The share prices of many pub groups have been hit hard but could bounce back.

We are already preparing for an economic recovery, although it may take two to three years. We are looking for companies with good management teams and cash available in order to grow their share of the market.

HAVE DIVIDEND CUTS HURT YOU?

Yes, but luckily we don’t have to pay our investors a certain level of income. We mainly focus on a company’s potential to grow. Sometimes the best

£1,000 invested at launch would be worth £7,056 today