Credit Suisse fund shuns commodities

By Sitaraman Shankar

LONDON (Reuters) - Credit Suisse's UK thematic fund is shunning red-hot commodity stocks, preferring instead to buy conservatively run companies with strong balance sheets and firms that gain from climate change and security issues.

The fund has chosen 10 themes ranging from the ageing process to the interest rate cycle through which it invests in British-listed stocks.

Even as oil and metal stocks have forged ahead amid weakness in other sectors, the fund is 13 percent underweight relative to the FTSE All Shares index on the two commodity families.

"We're starting to see a demand response to higher oil prices, with airlines grounding fleets and U.S. motorway miles recording their biggest fall in 66 years," said fund manager Marcus Hankey.

"And with growth slowing in developed markets and inflation becoming a major problem in developing markets .... we see inventories of metal commodities going up, and nickel, zinc and copper will all be in surplus this year," he said.

The fund's biggest overweights are energy group BG (BG.L: Quote, Profile, Research), bank Standard Chartered (STAN.L: Quote, Profile, Research), engineering group Smiths (SMIN.L: Quote, Profile, Research), telecoms firm Vodafone (VOD.L: Quote, Profile, Research) and platinum specialist Johnson Matthey (JMAT.L: Quote, Profile, Research).

Its top underweights are oil group Shell (RDSa.L: Quote, Profile, Research), miners Rio Tinto (RIO.L: Quote, Profile, Research), BHP Billiton (BLT.L: Quote, Profile, Research) and Xstrata (XTA.L: Quote, Profile, Research) and drugmaker AstraZeneca (AZN.L: Quote, Profile, Research).

SECURITY, CLIMATE CHANGE