HSBC GAM taps Lloyd's insurers and support services

By Claire Milhench

LONDON (Reuters) - HSBC Global Asset Management is backing Lloyd's insurers and support services in its repositioned UK Focus Fund, seeking more stable earnings.

It currently has an 8.5 percent allocation to Lloyd's insurers versus around 0.5 percent in the FTSE All-Share index, constituting the fund's main overweight.

The allocation represents part of a major shift in the fund's exposure. Last year it aggressively rotated out of "special situations" stocks -- small and mid-caps -- into mega-caps as the outlook for the UK economy deteriorated.

The concentrated "best ideas" fund of some 24-28 stocks had been split 50/50 FTSE 100/non-FTSE 100, but in 2008 the small and mid-cap exposure was reduced dramatically, with the split now 84/16 in favour of the FTSE 100.

BP (BP.L), Royal Dutch Shell (RDSa.L), AstraZeneca (AZN.L), GlaxoSmithKline (GSK.L) and Vodafone (VOD.L) make up a large proportion of that FTSE 10 exposure.

"Large caps are less geared and are better able to refinance themselves, whereas small caps are hurt by the contraction of bank finance," said Alec Letchfield, head of UK equities and manager of the UK Focus Fund.

AIG EFFECT

Outside the mega-caps, he holds specialist insurers Amlin (AML.L) and Lancashire Holdings (LRE.L) within the defensive segment, which comprises 31.4 percent of the portfolio and also features utilities such as Centrica (CNA.L).