Stephen Message has turned over 45% of the Old Mutual Extra Income fund since he took over the management in December.
Message increased conviction in individual holdings and reduced the total number from the targeted 75 to 50.
Examples of sales include stakes in Debenhams and HMV, and Vedanta Resources, a diversified mining company. Vedanta Resources was one of Message’s highest-conviction holdings, but he prefers industrial engineering and oil services companies.
In contrast, Debenhams was not a high-conviction holding. Message says there are other British retailers, such as Next, that make a more compelling investment case.
Overall, his recent changes translated into 65% exposure to large caps and 35% exposure to mid caps. Before he took over, the weightings were 60% large cap, 30% mid cap and 10% small cap.
He created key overweight positions in support services and consumer cyclical areas such as media, travel and leisure. The fund’s key underweights are tobacco, real estate and utilities. Message says the real estate sector is too leveraged, while tobacco and utilities do not offer much scope for dividend growth.
Message increased the fund’s exposure to pharmaceuticals and decreased its weighting in the mining sector. However, the portfolio maintains a cyclical bias and is invested in stocks that he expects to benefit from an economic recovery.
Message says he will continue to manage the fund with a strategy where he allocates more to high-conviction holdings.