UK growth fund managers are increasingly seeking value from ‘large and mega-caps’, according to research and ratings agency Standard and Poor’s.

Despite a lack of strong consensus a number of growth investment managers are seeing fewer opportunities in medium sized businesses against the backdrop of economic volatility and pressures on pricing.

In a review of 44 funds, the majority rated by Standard and Poor’s, analyst Daniel Vaughan said an issue for many fund managers over the summer had also been what to do about BP, in the light of the changes in the company’s share price prompted by the oil spill in the Gulf of Mexico.

Vaughan identified several fund managers that were moving towards equities in large companies with some commentators suggesting mid-cap companies could see falls in value.

“A bull run since the late 1990s [on the FTSE 250 index], together with the strong rally from the March 2009 lows led by cyclical companies, has left some market commentators talking about a potential mid-cap bloodbath in 2010,” he said.

However, Vaughan found no consensus on this amongst rated managers, with some highly rated managers having higher than ever exposure to firms classed as mid-cap.

“Central to the argument is the issue of gaining exposure to overseas sales and structural earnings growth,” he added.

Amongst those seeking value in larger companies were Ben Whitmore at the Jupiter UK Special Situations Fund, Mark Lyttleton who manages the BlackRock UK Fund and James Griffin who runs Fidelity’s MoneyBuilder Growth Fund.

Tom Dobell at the M&G Recovery Fund was still finding opportunities in the mid-cap area and AIM listings, with Karen Robertson at Standard Life investing 30 per cent of the UK Equity Growth Fund portfolio in mid-cap firms.

© Fair Investment Company Ltd