Small cap star Carcano stands by UK bets despite downgrade

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Markets will not punish UK-listed companies on the basis of a falling pound, according to Metzler's small and mid cap manager, Lorenzo Carcano.

Carcano holds a third of his Metzler European Smaller Companies Class fund in UK-listed companies and has no plans to sell the holdings on currency weakness.

'We haven't sold any UK names yet. We think the market is sophisticated enough to understand that a company doesn't have to be exposed to a weakening pound just because it is listed in London.'

The question, raised by an investor audience at the Institutional Money conference in Frankfurt on Tuesday, highlights concern over the UK's ailing economy after the country was downgraded to AA1 by Moody's this week.

The fund includes companies that make most of their profits oversees, and so will benefit from a falling pound, as well as firms, such as house builders and the gambling firm Paddy Power, that are more domestically focused.

'When we look at the business models of many of these companies, we can see that they operate in niche markets and so are less effected by the overall economy,' added Carcano.

In the January fact sheet of the €218 million Metzler European Smaller Companies fund, Carcano had said he was buying into markets of the euro area's most debt-ridden economies, such as Portugal and Italy.

The fund's top five holdings include UK-listed firms alcohol manufacturer C+C Group, data company Telecity Group and tech firm Imagination Tech.

The Metzler European Smaller Companies Class fund returned 35.5% over the last three years. Its index, the STOXX Europe Small 200 CR index rose 23.4% in the same period.