Star manager Richard Buxton’s decision to leave his role as head of UK equities
at Schroders came as a major blow to investors in his funds, who have a short period of time in which to decide whether to stick with their current position or look for alternatives
Buxton will be running a similar open-ended fund to Schroder UK Alpha Plus
for Old Mutual, but there has been no announcement on an equivalent closed-ended one.
The Schroder UK Growth IT
has actually beaten the open-ended Schroder UK Alpha Plus fund over one and three years and falls only slightly short over five.
Performance of fund vs trust and benchmark over 3yrs
Source: FE Analytics
There are certain trusts in the IT UK Growth sector that have done better, but they have a higher weighting to the FTSE 250, which has outperformed in the past few years.
According to Monica Tepes, associate director of investment funds research at Westhouse Securities, the trust keeps around 80 per cent in the FTSE 100 – higher than the majority of its peers.
Given the relative underperformance of the FTSE 100, this makes Buxton’s outperformance particularly impressive, and also makes it more difficult to find alternatives that have the same strategy.
With the manager set to leave on 14 June, FE Trustnet
takes a look at closed-ended options for investors who want a similar strategy to the one he uses on Schroder UK Growth.
"I don’t think there are many alternatives in the UK Growth sector with a similar market cap," Tepes said.
"Most of the others are rather smaller funds, but an interesting one could be Keystone, managed by Invesco. It’s got a good track record and a good yield, although it’s not an income fund."
The £201m trust tends to buy more defensive stocks than Buxton’s, with the consequence that it is currently yielding 3.24 per cent, although it does not target a high yield.
It has beaten Schroder UK Growth over three years, making 60.97 per cent, and is the second best-performing fund in the sector over five, having made 86.95 per cent.
Over 10 years it has made an impressive 325.48 per cent while the FTSE All Share has made 168.56 per cent.
Mark Barnett has run the portfolio for all of this time, meaning that he knows the market and the trust very well.
It is weighted more towards the FTSE 250, holding around 50 to 60 per cent in that index.
The portfolio has five FE Crowns and is sitting on a discount of 2.7 per cent, according to the AIC.
It has a performance fee, and inclusive of that, ongoing charges last year were 1.14 per cent.
Finsbury Growth & Income IT
Tepes says that she would look to the UK Growth & Income sector for a replacement to the trust.
"Finsbury Growth & Income would be my choice," Tepes said. "It has done pretty well in the last 12 months and the premium has been as high as 5 per cent, but now it is less than 1 per cent, which makes this a good time to buy."
Tepes says that investors can be confident in the abilities of FE Alpha Manager Nick Train's
"He invests in stocks and holds them for the long-term, and this has served him well," she said. "It’s also a good size, £350m, so it’s pretty liquid."
Finsbury Growth & Income, which has five FE Crowns, is the outstanding trust in the IT UK Growth & Income sector over five and 10 years, having made 132.1 per cent and 429.5 per cent respectively.
Performance of trust vs sector and benchmark over 5yrs
Source: FE Analytics
Although it sits in the UK Growth & Income sector, it targets a total return rather than an income, and is yielding a modest 2.14 per cent. The ongoing charges are 0.94 per cent.
Temple Bar IT
The other fund Tepes likes in the UK Growth & Income sector is this £670m portfolio managed by Alastair Mundy
"It has got a good track record and is a good size, meaning it’s very liquid," she said. "It’s on a 3 per cent premium but it has been trading on average closer to 5 per cent."
Temple Bar is second only to Finsbury Growth & Income over five years, with its returns of 111.96 per cent.
Over three years it has made 57.66 per cent, almost double the 30.48 per cent made by the FTSE All Share. Nick Train’s fund has made 90 per cent in this time.
Tepes says that the discounts on both this trust and the Finsbury trust have been coming back in in the last few days as the market retreats from its recent gains.
"Both of them, if you think the markets are getting bad or choppy, their managers should give you the confidence they can cope with it."
"On a risk-adjusted basis, they have also done well, although there’s no guarantee this will continue, of course."
It has ongoing charges of 0.51 per cent.
"There are very few trusts that have 70 to 80 per cent in the FTSE 100," Tepes said. "The FTSE 250 has done very well and that has probably held Buxton back."
"Merchants has a larger exposure to the FTSE 100, around 75 per cent."
This £444m trust is run by Simon Gergel
at Allianz. It takes the FTSE 100 as its benchmark, which it has significantly beaten over three and five years.
Over the shorter period it has made 45.18 per cent while the index has made 27.07 per cent, according to data from FE Analytics
Performance of trust vs sector and benchmark over 3yrs
Source: FE Analytics
It is currently yielding 5.4 per cent according to the AIC, more than the sector average. However, on a total return basis it has underperformed the average fund in the sector, perhaps due to its large cap focus.
It is currently sitting on a discount of 4.2 per cent and has ongoing charges of 0.64 per cent.