‘Budget giveaway? We are staying cautious’
The eyes of the City were on the House of Commons on Monday as Philip Hammond delivered his latest Budget to Parliament. But how much effect do the Chancellor’s words have on investors? While Mr Hammond may have declared an end to austerity, does this have any immediate impact on the markets?
Adam Avigdori, co-manager of the £380m BlackRock UK Income fund, told Telegraph Money that a change in the Chancellor’s rhetoric on austerity would not cause him to make immediate changes to the portfolio.
Who is the fund for?
The fund’s objective is to deliver a total return for investors, with good capital returns and a growing dividend. Our dividend has grown for 30 years.
How do you pick your holdings?
As an income fund we are predisposed to liking companies that pay big dividends. But a bigger characteristic we look for is the “free cash flow” of a business – cash that can be reinvested in the business or given back to shareholders.
We look for businesses that have a competitive advantage, such as a unique service, technology or geographical position. We are very open-minded, but our holdings are often companies that are less capitalintensive and need less cash to grow. We want to invest in firms that can adapt to technology, regulation and consumer behaviour.
Are there any sectors you avoid?
We don’t have any holdings in the telecoms sector any more. It is hard for these companies to generate cash and it is very expensive for them to operate, as they need to buy mobile “spectrum” and continually invest in their networks.
We also avoid companies that have been dependent on cheap debt.
CV: Adam Avigdori
Mr Avigdori joined BlackRock in 2006 when Merrill Lynch Investment Managers merged into the firm. He graduated from the In the next few years we think the debt market will get selective about which businesses it supports. We want companies that control their own destiny.
BlackRock’s Adam Avigdori tells Adam Williams that the end of austerity won’t affect the way in which he invests
How have you reacted to the recent stock market falls?
We haven’t changed a great deal in the fund, even though the economic environment is not as good as it has been. This year we have been slightly cautious, and we think that’s the right approach.
As a UK-focused fund, does the Budget have a big impact?
We won’t make any changes now, as we don’t invest on the basis on what the Government may or may not do.
But we have definitely seen a change in rhetoric from the Government. For the past eight years it has been focused on the country’s balance sheet, but this Budget signalled the end of that. What surprised us was just how much the Chancellor gave away in the end.
Clearly the Government is looking to increase public spending. We can debate whether that is good or bad, but we haven’t had growing public spending for a long time. What they will do after Brexit, we don’t know, but it does seem like they’ve drawn a line under austerity.
What has been your biggest success of recent years?
Consumer staples have performed really well for us. When you’ve got businesses that have very strong consumer loyalty, they support very strong growth over a long period.
We believe there is more growth to