The 240m Norwich UK Equity fund has undergone restructuring since Chris Murphy took over as manager 18 months ago. His aim was to create a higher conviction fund.
Murphys first decision when he became manager in June 2006 was to sell 40% of the portfolio.
He sold out of large positions in FTSE 100 companies such as BP, GlaxoSmithKline and HSBC to generate capital to invest in stocks he wanted, he says.
There were lots of large positions in BP, Lloyds, Barclays, Glaxo and HSBC, he says. The top 15 holdings were 60% of the fund.
The rationale for everything Ive done is freeing up capital within the fund to invest in stocks I think are going to add a lot of value to the portfolio. [I] do not hug stocks. I look for growth businesses that create value in the long run.
When constructing a portfolio dont start with the index, fill it up with stocks you want to own, Murphy (pictured) adds. That way youre always trying to look for good ideas.
The Norwich UK Equity fund consists of 45 holdings now rather than the original 60. Over the 18 months to January 21 the fund was first quartile. It returned 14.3% compared with an IMA UK All Companies sector average of 6.36%, according to Morningstar.
Although Murphy says the initial restructuring did well for the fund, over the past six months he has reduced his exposure to medium-sized companies.
He says they began to look expensive so he switched to companies with better quality cash flow instead such as Cadburys and Unilever.