Dan Nickols, manager of the £826m Old Mutual UK Smaller Companies fund, has said he would have to "radically restructure" his portfolio if the UK voted to leave the EU.
Nickols (pictured), like his colleague OMGI CEO Richard Buxton, said he does not expect a Brexit vote in June's referendum, but if this happens his portfolio would be negatively affected in its current shape.
The fund is currently heavily weighted towards consumer stocks such as retailers, with 23% allocated to the consumer services sector and 10% to consumer goods.
Nickols said: "This is not a portfolio you would want to have in a Brexit scenario - we would have a lot of work to do to restructure it.
"Should we see a vote to exit the European Union, a few things will likely happen; sterling levels will weaken, there will be a further slowdown of some magnitude in the UK economy and people will be less willing to commit to big purchases.
"This would mean import dependent businesses, such as retailers, would see headwinds if sterling weakened."
The manager said he has not yet taken any steps to mitigate the risk of the UK leaving the EU as it is difficult to take positions amid ongoing uncertainty surrounding the referendum outcome.
However, in the event of a Brexit, he would reposition the fund towards more defensive sectors such as industrials and export-orientated firms.
Should we see a vote to exit the European Union, a few things will likely happen; sterling levels will weaken, there will be a further slowdown of some magnitude in the UK economy and people will be less willing to commit to big purchases.
Sterling weakness
In contrast, Fidelity's Alex Wright has already started taking action within his £2.7bn Special Situations fund in light of sterling weakness.
Four of Wright's top five largest holdings are overseas earners, reporting in euros or the US dollar, and he has reduced his overweight sterling position to neutral.
"Some two-thirds of my fund is invested in companies which are not linked to the UK economy and this should more than counteract any underperformance from UK companies. The balance and the diversification of the fund across currency and geography is the best way to hedge against a binary outcome," he said.
"If the UK votes to leave then there would be a short-term negative shock, and I would expect the pound to weaken further, but it would be positive for markets as a whole over the medium term, even though an out vote would be negative for the UK economy," he added.
Similarly, SVM's Margaret Lawson, co-manager of the £141m UK Growth fund, has begun taking profits in mid-cap consumer cyclical firms.
She said: "The patterns seem similar to before the Scottish Referendum and the UK General Election. There has been profit-taking in some growth businesses, and also some pressure on consumer cyclicals and staples."
Although she does not have comprehensive plans in place to respond to the referendum within her portfolio, she has moved into defensive names which report earnings in dollars or other international currencies.
"We have been adding particularly to staples with global exposure, such as tobacco," she said.
Specialist focus
However, Nickols added it is more difficult for small-cap managers to gain access to overseas earners, many of which are commodity-focused.
"The Numis Smaller Companies index does have 40% in non-UK earners but they tend to be quite specialist companies and sector specific, so oil, gas and industrials.
"[An overseas-focused fund] can be constructed but the outlook for those stocks is uncertain so we do not think it is worth doing."
