Since the start of the year, the FTSE 100 has risen by 3.8 per cent to more than 6,100 points.
Performance of index in January 2013
Source: FE Analytics
Hargreave (pictured) believes this good run is set to continue, supported by strong corporate profits.
"The market has a lot of momentum, there’s no question about that," he said. "It’s going to take a lot to stop that. This process could continue for a long time, although, that being said, I don’t think equities are particularly cheap."
In the early part of December, the veteran manager predicted a Christmas rally would push London’s blue chip index above 6,000 – a mark that has already been well surpassed.
Hargreave expects the surge to continue, but adds there may be some bumps later on in the year.
"It will be a good first quarter but it could get a bit bumpy after that. Still, I think it’s going to be OK for a while. It was a good year last year and it should be another good year this year," he said.
"Corporate profitability is looking pretty good, but you’ve got to pick your stocks," he added.
Although Hargreave was holding a relatively high level of cash in the early part of 2012, he has since fully invested his £501.5m Marlborough Special Situations and his £115.2m Marlborough UK Micro Cap Growth funds.
"In Special Sits I’m holding about 1 per cent [in cash], and in the Micro Cap I like to hold a little bit more just because it’s a fairly illiquid sector, but I’m only holding about 5 per cent."
Both funds have benefitted significantly from the manager’s bullish view in recent months.
Since the start of July, the UK Micro Cap Growth fund has made 16.65 per cent, while the four crown-rated Special Situations fund is up 15.63 per cent.
The returns are broadly in line with those of the IMA UK Smaller Companies sector, which has made 16.81 per cent since the start of July.
Both funds are top-quartile performers over the last five years, having returned 78.66 per cent and 64.02 per cent respectively, while the sector is up just 38.4 per cent.
Performance of fund vs sector over 5-yrs
Source: FE Analytics
Both funds are currently weighted towards telecommunications and industrial stocks. Transport hardware and software firm Tracsis and software supplier Idox feature in the top-10 of the Micro Cap fund, while chemicals manufacturing company Elementis and software provider Anite are the largest holdings in the Special Situations portfolio.
Hargreave’s approach has made his Micro Cap fund one of the most consistent IMA UK All Companies portfolios, and it is one of only two to beat its sector average in each of the last five calendar years.
Hargreave’s reputation is built on a longer track record, however; data from FE Analytics shows that he has outperformed his peer group composite over one, three, five and 10 years.
Over the last decade, the manager has returned 339.02 per cent to investors, nearly tripling the returns of his peer group average, which delivered 145.2 per cent.
The Micro Cap Growth fund requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.52 per cent, while the larger Special Situations fund requires a minimum investment of £1,000 and has a slightly higher TER, at 1.54 per cent.