Still investment potential in the High Street for UK equity investors

Still investment potential in the High Street for UK equity investors

06 July 2011 / by Paul Dicken

There is longer term potential in the UK's high streets, despite recent high profile problems, the head of UK equities at Schroders has said.

Richard Buxton, who manages the Schroder UK Alpha Plus Fund, said 2011 was ‘always going to be an extremely challenging year for the consumer and retailers’ but longer term strong retailers would survive and could benefit.

Buxton believes a combination of factors will make the economic growth sluggish for a number of years.

“So long as the Government is trying to reduce its expenditure (or, at the very least, curb the growth in its expenditure) and so long as the banks are having to reduce the size of their balance sheets, then the private sector is going to be borrowing less, saving more and spending less,” he said in a recent note.

While suggesting there could be a ‘subdued consumer environment for several years’ it is likely that 2011 could be the time of the greatest squeeze on consumers.

Buxton doesn’t expect a future VAT rise or substantial increase in other taxes, while predicting that this year could also be the time of highest uncertainty for employees in the public sector, as government spending cuts come into effect.

Some retailers stand to gain

UK retailers with strong balance sheets, experienced and cautious managements, with sustainable franchises, are seen as having the greatest potential to survive the current tough times, while in the long term such companies could benefit from the ‘reduction in capacity’ as other retailers fail or have to scale back their operations.

The UK Alpha Plus Fund primarily invests in a relatively concentrated portfolio of UK-listed companies or companies with significant operations in the UK. The fund's holdings may include companies in various sectors including consumer services, financial services and mining.

As it holds a relatively small portfolio of companies the fund can experience higher volatility.

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