Chillingworth (pictured), who heads up the Rathbone Recovery and Rathbone Blue Chip Income & Growth funds, accepts that there will be twists and turns in the market over the coming months but believes sentiment towards the UK is at its highest for some time.
"I think we can see some sort of increased growth in the UK, especially if there are no more major problems in Europe," he said. "Recently, the general trend in UK funds, including mine, has been to look for companies that have exposure from outside the UK, but the domestic sector is now looking a bit more interesting."
"Consumers are feeling a bit happier and have more income at their disposal, and workers – particularly in the private sector – are more confident that they are going to stay in their job."
Chillingworth says it is still too early to significantly increase exposure to the UK, even though he has already added a couple of domestic plays.
"I think it’s a bit too early to say whether or not we will see more attention on the UK consumer," he continued. "I think we will have a clearer picture early next year."
"I have recently added a new holding to the Recovery fund though – Moss Bros."
"It was a tired business but new management has come in and turned things around. Beforehand, the stores were a mess but they have upgraded the staff and closed 35 stores already because they were either in the wrong place or were too small."
"The business is also expanding its range to capitalise on new trends, in areas where it can charge a premium. It now rents suits and dresses for events like school proms, which it can charge extra for. They also have a Ted Baker range, which again is a good moneymaker," he added. FE Trustnet readers are also positive about the outlook for the UK; according to the latest poll, 57 per cent believe it is on the road to recovery.
While Chillingworth is more optimistic about the UK, he thinks a full-out market rally is still dependent on external factors – particularly in the eurozone.
"Issues like the Spanish bailout and slow German growth are fully fractured into people’s minds," he said. "Over the last months, we have seen a great deal of volatility due to policy changes, so it is uncertain."
FE data shows the FTSE All Share is up 10.11 per cent over one year. Since the beginning of June, it is up 12.65 per cent.
Performance of index over 1-yr
Source: FE Analytics
Chillingworth feels the UK’s 1 per cent GDP growth figure for the third quarter of this year is encouraging, but thinks the Olympics had a big part to play. His views were echoed by a number of industry experts in a recent FE Trustnet article.
According to FE Analytics, since the launch of the £61.2m Rathbone Recovery in the summer of 2009, the fund has produced top-quartile performance over one- and three-year periods.
Jason Hollands, managing director at Bestinvest, believes there has been too much negative investor sentiment towards the UK in recent times, but says he has seen a change in attitude recently.
"I think a lot of advisers have seen their clients take a cautious view on the UK. I think this has been overly cautious in my opinion," he commented.
"Fixed Income is our favoured asset class for the UK, but UK equities are also looking pretty good."
"We recently released the results of inflows into funds, and three UK funds were among the top-10 so it does seem sentiment is changing."
Performance of manager vs peer group composite
| Name | 1-yr returns (%) | 3-yr returns (%) | 5-yr returns (%) | 10-yr returns (%) |
| Julian Chillingworth | 13.41 | 32.04 | 4.32 | 86.18 |
| Julian Chillingworth peer group composite | 10.31 | 24.02 | 4.65 | 95.69 |
Source: FE Analytics
According to FE Analytics, Chillingworth has outperformed his peer group composite over one and three years, but is marginally behind over five and 10.
His Rathbone Recovery fund is a top quartile performer in its IMA UK All Companies sector over one and three years, with returns of 13.9 and 32.91 per cent respectively. Rathbone Blue Chip Income & Growth is second quartile over one, three, five and 10 years.
He was formerly lead manager of the Rathbone Global Opportunities and Rathbone Ethical Bond portfolios.
In an article later today, FE Trustnet will highlight five funds that are poised to benefit from a rally in the UK markets.