Richard Buxton, manager of Money Observer Rated Fund Old Mutual UK Alpha, has insisted that the UK will not leave the European Union (EU) following a referendum set for 2017, despite calls from a number of prominent politicians and business figures to the contrary.
'It really is very simple: the UK is not going to leave the EU as Germany doesn't want us to. We contribute a great deal; it simply wouldn't be in Europe's interest. There is just no way we are going to leave, so move on,' Buxton says.
The manager's comments follow a disappointing day for prime minister David Cameron in Europe. On Tuesday (10 November), Cameron's four key reform proposals, which include barring European immigrants from claiming in-work benefits for a minimum of four years after arrival in the UK, were labelled both 'pretty thin gruel' by hard-line Tory eurosceptics and potentially illegal by EU officials.
LITTLE APPETITE TO LEAVE THE EU
Mark Holman, chief executive of fixed income specialist Twenty Four Asset Management, largely agrees with Buxton's assessment, adding that in his opinion there is little appetite from within the business community to leave the EU.
However, Holman says that the uncertainty that the Brexit debate will generate is likely to negatively impact the price of sterling next year.
Both managers are sanguine about the potential impact of drawn-out political wrangling on their portfolios, with neither planning to make any changes in the run-up to the referendum.
Of far more concern is the timing and impact of the first interest rate hike at the US Federal Reserve and subsequently the Bank of England, with Buxton expressing particular frustration at the reluctance the central banks have shown to return to 'normal' monetary policy.
'In the five to six years since the financial crisis, the global economy has taken two steps forward and one step back. Central banks have been very cautious, often scared by any blip in global growth.
'Forward guidance was meant to help markets, but frankly I'd rather not have that help; I'd rather we all looked at the same data and made sensible decisions. If [central bankers] could tell me where the yield curve will be in a year, that would be useful information,' he says.
UPTURN FOR CYCLICAL STOCKS
When rates do finally rise, Buxton - who was recently made Old Mutual Global Investors' chief executive alongside his fund management duties - says that cyclical stocks should see an upturn, with HSBC already having benefited from an expectation of higher rates.
This should prove beneficial for Buxton's portfolio, which has suffered heavily from its holdings in cyclical stocks including beleaguered miner Glencore, oil and gas majors BP and Shell, and smaller energy firm Genel Energy - a Kurdish producer that has shed 77 per cent of its share price in the year to 11 November.
The steep declines seen in the share prices of these firms in recent months have weighed heavily on Old Mutual UK Alpha's performance, with the fund posting one of the worst returns in the 272-fund UK all companies sector over the year to 11 November (-1.25 per cent).
However, the manager says he remains confident in the long-term outlook for these companies and so has maintained his holdings. The fund was placed under review in Money Observer's recent Rated Funds review.