Standard Life Investments UK Smaller Companies manager Harry Nimmo says the “resilience” of his fund in difficult markets will bring benefit as the market looks set to move out of an immediate recovery period.
Nimmo says the £1.2bn small cap fund has performed well in the current recovery period immediately following a bear market, in line with the strong performance that normally occurs in the small cap space during this stage in the economy cycle.
However he does acknowledge that the fund also tends to lag its peer group during these periods as a result of its risk averse process, while fairing better in the “mid to later stages of the economic cycle”.
Signs that the current economic cycle could be about to shift out of this initial recovery period should leave the fund poised to demonstrate its “resilience” in difficult markets, according to Nimmo.
He says: “We think we are coming out of the recovery phase certainly in the next six months. Investors now are seeing tangible signs of recovery both in the UK and in the US and as investors are always forward thinking, they will begin to think out what is their next move in markets.
“I would say our fund is an each way bet, it benefits form the strength of smaller companies and it benefits from these new growth models but it also give you a resilience in these difficult market conditions.”
Nimmo goes onto argue that this move is not likely to come all at once considering Bank of England governor Mark Carney’s recent statement on keeping rates low for some considerable time.
Recovery stocks have also continued to do well in recent weeks, adds Nimmo, following signs of improvement in the UK economy.
Nimmo also stresses the benefit of the fund’s resilience in the likelihood of a correction in equity markets, something which he has become “wary” of more recently.
He adds: “I am positive about equities but I am a little bit wary now because they have been so strong for so long.
“This is a long-only fund so we can’t buck a bear market but we can provide a modicum of resilience.”