by Bo Seo

Future Generation fund managers have said they see upside in small and medium cap stocks, while large companies struggle to eke out earnings growth in a slowing economy.

Phil King, chief investment officer at Regal Funds Management, said large cap stocks in Australia faced serious headwinds: sluggish economic conditions, growing competition in sectors like retail and telecommunications, and an earnings hit from poor acquisitions.

“[Small and medium caps] may look expensive now. But look forward a few years, and they won’t be so expensive,” he told The Australian Financial Review.

Future Generation Investment Company is a listed investment outfit that manages a global (FGG) and domestic (FGX) fund. Its annual donation of 1 per cent of assets to charities for children is expected to exceed $10 million in 2019.

Mr King, whose long short equity fund makes up 10 per cent of the FGX portfolio, said on an earnings call that he saw upside in two key sectors: technology and mining.

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