Which IMA funds are most exposed to the BP plummet?

Tom Dobell’s £6.4bn M&G Recovery fund is one of eight IMA funds that has more than 7 per cent allocated to hard-hit oil major BP.

The company shed 6.5 per cent of its value soon after last week’s US district court judge’s interim finding that the firm’s actions leading to the 2010 Deepwater Horizon environmental disaster were “grossly negligent” rather than simple negligence.

That boosted its potential liability under an on-going civil action to $17.6bn (£10.94bn), five times the $3.5bn it has provided for on its balance sheet.

BP has announced it is to appeal the US judge’s decision.

The mammoth M&G special situations fund holds a 7.65 per cent position in the company, according to FE Analytics.

BP currently makes up 4.09 per cent of the FTSE All Share index, it was 4.23 per cent before the court’s decision.

M&G Investments declined to comment, as did all asset managers approached by Fundweb.

The IMA funds with the largest weighting to the company were both from UBS, the £3.2m UK Equity Income and £25.6m UK Opportunities funds, with 9.5 per cent and 8.8 per cent respectively.

The £124m Majedie-run SJP UK Growth fund has the third-highest allocation to BP in the IMA, equal with M&G Recovery at 7.65 per cent.

IG Group chief markets strategist Brenda Kelly says the share price took a 6.5 per cent hit immediately following the announcement, but it has crept up 0.2 per cent in the few days of trading since. 

There appears to be “a positivity” in the market, she says.

“No brokers are reaching for the sell button.”

There seems to be a reasonable floor around the 450p mark, where investors are happy to buy in.

Several firms, including Citigroup and Morgan Stanley, have given the company a buy recommendation, Kelly says.

Perhaps because of the size of the company and the sheer amount of value it has shed over the past few years, she says.

“It’s right smack in the middle between the highs it had before the Deepwater disaster and the lows after it had to sell off assets to pay the compensation claims.”

At 10am the stock was trading at 463p, down 1.17 per cent. It remains 29 per cent down on its pre-spill peak of 651p in April 2010.

The UK Government’s pledge to assist the company in fighting the fine is also a plus for the company, she adds.

The Deepwater Horizon rig in the Gulf of Mexico exploded in 2010 killing 11 men. BP pled guilty to manslaughter of the victims two years later, paying $4bn in fines and penalties.

It has also agreed to pay reparation to businesses affected by the spill, that bill is $9.2bn and still increasing.

IMA funds exposed to BP:

  Fund     BP Holding
         

£3.2m

UBS UK Equity Income

 

9.50%

£25.6m

UBS UK Opportunities

 

8.80%

£124m

SJP UK Growth

 

7.65%

£6.35bn

M&G Recovery

 

7.65%

£2.7bn

Majedie UK Equity

 

7.40%

£1.89bn

Jupiter Income

 

7.31%

£286m

JP Morgan UK Managed Equity

7.10%

£223m

Insight Equity Income

 

7.02%

Source: FE Analytics