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The Evelyn Partners Core Managed Portfolio Service (MPS) team has added Fidelity Special Situations as a new holding in its UK equity allocation in the latest rebalance.
Although the team continues to consider large UK companies as “attractively priced”, it sees more value in mid-sized and smaller ones.
James Burns, lead portfolio manager of the Evelyn Partners Core MPS, said: “We are seeing increased M&A activity as both corporate acquirers and private equity seek to take advantage of the historic cheapness of the UK market.
“With its greater allocation to companies outside of the FTSE 100, we believe the Fidelity Special Situations fund is well positioned to benefit from this trend. Top holdings in the fund include consumer goods company Reckitt Benckiser, banking giant Standard Chartered and utility group National Grid.”
Separately, while the latest rebalance made no changes to the overall mix between equities, bonds and alternatives, equity exposure to the US was boosted at the expense of the UK and Europe, while the government bond allocation was tilted towards UK gilts at the expense of US Treasuries.
Burns added: “The equity shift to the US is based on the strong mandate given to the incoming Republican administration that is expected to support US economic and market supremacy at the expense of the rest of the world. As with June’s rebalance, the bulk of the increase in the US was away from the big technology names that dominate the index, as we see the rally in US equities broadening out.
“The implications for the UK economy post Rachel Reeves’ inaugural budget and the US economy post Donald Trump’s re-election have shaped our thinking within the bond allocation. The exposure to government bonds remains diversified, but we see a greater chance of inflation being more elevated in the US whilst growth in the UK may well be more muted. With this in mind, we have slanted the allocations towards UK gilts as well as US Treasury Inflation Protected Securities.”
