Graham Kitchen, manager of the £709.61m Invesco Perpetual Income & Growth fund, has taken a significant overweight position in utilities, tobacco and food and drug retailers. Whereas these sectors together comprise 7% of the FTSE All-Share index, they account for 20% of Kitchen’s portfolio. Kitchen has also reduced his exposure to small and mid-caps in the belief that large companies will finally outperform this year. As well as increasing his holdings in Vodafone, GlaxoSmithKline and Imperial Tobacco, Kitchen has taken new stakes in Unilever, Scottish Power, United Utilities, Rentokil and Rexam. He has raised his exposure to these defensive sectors because he believes the stockmarket recovery could be slower and more volatile than the consensus view. “While there is a real improvement in industry sentiment, I believe that the recovery will be more difficult than is generally being predicted and, as such, the fund remains overweight in defensive stocks,” says Kitchen. “I believe that less cyclical, betadriven stocks will do better over the longer term and therefore have included stocks such as BAT and Tesco in the portfolio. I have reduced holdings in the small to mid-caps since I believe the best returns this year will come from the large-cap end.” Kitchen says that as he expects modest returns from the UK stockmarket, he favours companies whose earnings and dividends should be resilient to economic cycles. This reflects the 20% weighting towards non-cyclical consumer goods, of which the largest sector is tobacco. The largest holding in the fund is still HSBC, at 5.5% of the portfolio. Vodafone has the joint second-highest holding with BP Amoco at 4.8%, followed by Imperial Tobacco at 4.6%. The fund has beaten the UK Equity Income sector in four of the past five years, with a five-year gain of 24.27% against a rise of 16.32% from the sector.