As inflation takes hold in the UK it is definitely a key time to review your holdings of UK funds and consider where to be best placed to capitalise on growth prospects in 2011.

If inflation increases, firms’ costs go up and if the economy is weak they cannot then pass them onto their consumers. Firms with low margins, generic products and little bargaining power will be left squeezed by this effect, and may find themselves struggling with their profitability, whilst those firms with high margins, strong brands and bargaining power could do very well.

Corporate profits have been boosted over the last couple of years by the ultra-low interest rates and benign inflation, but as inflation bites and costs increase, this may be about to change.

Investors have ridden the small cap bounce in 2010, with UK smaller companies being the best performing IMA sector over the last twelve months, returning 31.5% growth*. Now though is the time to consider taking profits and switching to funds which invest strategically and have an unconstrained view as to the best stocks to pick irrespective of sector.

Fund Manager profile :

Nigel joined AXA Framlington in 2002. He is the lead manager for the AXA Framlington UK Select Opportunities Fund. He trained as an accountant with Robson Rhodes, leaving to join Carrington Pembroke (subsequently ABN AMRO and now Artemis Fund Managers) as a Private Client Portfolio Manager. He subsequently joined Hill Samuel to run the Hill Samuel Smaller Companies Unit Trust for two years before rejoining Carrington Pembroke in 1986, launching and managing their UK Growth Fund. Nigel graduated from University College London with a degree in Economics and Geography in 1976.

Standard Initial Charge.........6.25% 

Thomas Heald Discount........6.25%

AxA Framlington UK Select Opportunities Fund

My choice for 2011 is Nigel Thomas’ Axa Framlington UK Select Opportunities fund, which has been increasing its holdings in large cap stocks with strong cash flows over recent months, to better capture those inflationary growth opportunities. He has a well-established, proven investment process that combines stock selection skill with detailed analysis of secular trends.

The Fund is an excellent performer, achieving top quartile performance over 6 months,1, 3, & 5 year period and since Nigel took control of the Fund in 2002*

We believe that large cap companies look good value at present, and that the skills of a top stock picker will provide a good opportunity to capitalise on UK returns in 2011.

If this is of interest then you will find this fund in Thomas' Top 20

*Source Trustnet 25/01/2011

*Source of performance figures: Lipper as at 30/11/10. Basis: bid to bid, with net income reinvested, net of fees in GBP.