CHARTERED WEALTH MANAGER, WILLIS OWEN

WILLIS Owen’s Adrian Lowcock cautions investors against chasing market rallies – dubbed on Friday the ‘Santa Rally’. Yet he believes the UK market is in a stronger position than it has been for many years.

He says: ‘A Conservative majori ty gives some certainty over Brexit and has removed the risk of the anti- business policies of the Labour manifesto impacting on the stock market.’

Lowcock believes it is important that investors have their portfolios well diversified – across both assets and markets. ‘Having a portfolio positioned for one outcome is a high risk strategy,’ he warns. Yet the funds that he believes will fare the best in the next five years are those focused on undervalued UK businesses – domestically focused a nd o verl o o ked by i nvestors because of Brexit uncertainty and concerns over the future course of the economy. Among his favourites is the £1 billion investment fund Investec UK Special Situations, run by ‘seasoned and talented’ manager Alastair Mundy. It invests in companies that have underperformed the market but where Mundy is convinced there will be a turnaround in the value of the shares. Top ten holdings include builder’s merchant Travis Perkins and Royal Bank of Scotland.

Adds Lowcock: ‘Mundy and his team use a well-established investment process, contrarian in nature, that seeks to invest in undervalued companies that at some stage will be appreciated by the wider market. It’s a structured process and focused on generating long-term returns for investors.’

Mundy is also confident that his investment strategy on Investec UK Special Situations will bear investment fruit. He says: ‘With positions in UK- centric banks, builder’s merchants, UK food retailers, DIY and housebuilding, we expect that the newly elected Conservative Government will be positive for the fund.’

Lowcock also l i kes Schroder Recovery, another £1 billion fund that looks to make money for investors from buying undervalued UK companies. Among its top ten holdings are RBS and Lloyds.

Both funds have underperformed the FTSE All-Share Index over the past five years, but Low cock attributes that to their investment style – ‘value investing’ – being out of favour. The funds are not dividend focused although the 3.4 per cent annual yield on Schroder Recovery is reasonable( the Investec fund yields 2.6 per cent).