‘There are a lot of bargains between the mid caps’

Axa Framlington fund manager Chris St John says recent turbulence for medium sized firms implies excellent businesses can be purchased cheaply

Investors have been selling their shares in medium-sized firms to take benefit of increased takeover exercise and to get newly listed businesses, according to fund manager Chris St John.

Mr St John, who has managed the Axa Framlington Uk Mid Cap fund because its launch in 2011, said this action had led to the latest sell-off between mid-sized companies, leading to the past 3 months to be “somewhat aggravating and disappointing”.

“Mid-cap firms themselves carried out phenomenally well more than the final yr,” he said. “But the last three months have been extremely volatile.”

The FTSE 250 index of medium-sized organizations returned 32pc in 2013, compared with 19pc from the FTSE one hundred. But the mid-cap index fell by two.4pc in excess of the three months to June, underperforming a achieve in the wider market and a 3.2pc rise in the FTSE one hundred.

Mr St John’s fund has also suffered a poor efficiency recently, with returns falling to minus 7pc over 3 months.

However, the manager said he hoped for “high single-digit returns” more than the yr. He appears for development organizations that he can acquire at a sensible value. His technique has worked effectively above the previous 3 years, delivering 59pc returns against a Uk All Firms sector typical of 28pc. The FTSE 250 has returned 42pc in excess of the period.

He aims to hold stocks for three-5 many years and is very stringent about trying to keep at least 70pc of the fund invested in medium-sized companies.

Mr St John said the latest turbulence had offered a very good chance to top up lengthy-phrase holdings.

“We have had a amount of businesses that have performed really well in terms of their fundamentals and in several instances have had upgrades to their earnings but the shares have fallen drastically,” he said, mentioning kitchen business Howdens Joinery and on-line estate agent Rightmove as two examples.

There is some overlap among this fund and Axa’s Uk Choose Possibilities fund, run by the very respected Nigel Thomas. Mr Thomas is a secondary manager on the United kingdom Mid Cap fund, and has tipped Mr St John has his successor on the Pick Options fund.

What are the choices?

Chris St John has served traders properly over the past 3 many years, in accordance to Martin Bamford of monetary planners Informed Choice, delivering returns of 71.1pc in contrast with 53.4pc for a common manager who invests in medium-sized firms.

“The only fund of this sort with somewhat greater efficiency is Neptune United kingdom Mid Cap, managed by Mark Martin,” Mr Bamford said.

The Neptune fund invests mainly in FTSE 250 firms, but also selects stocks from the greatest 50 firms in the FTSE Modest Cap index.

It was launched in 2008 and has been in the best 25pc of funds in its sector over the past 1, 3 and 5 many years. It is also a somewhat greater fund at £241m, in contrast with £76m for Axa Framlington’s. The Neptune fund focuses on overall health care, consumer companies and industrials, even though Axa favours industrial and economic companies. Investors could use this distinction as the choosing issue, mentioned Mr Bamford.

He also tipped Schroder United kingdom Mid 250, run by Andrew Brough. This is a popular fund, with assets of £1.6bn.

Juliet Schooling Latter of Chelsea Monetary Solutions also advised the Neptune Uk Mid Cap fund as a suitable alternative.

In addition, she tipped the Franklin United kingdom Mid Cap fund, run by Paul Spencer. Ms Schooling Latter explained Mr Spencer was a really seasoned manager who had done a “consistent and profitable job” at the fund.

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