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Buxton’s Old Mutual UK Alpha tops managers’ list of favourite UK funds

25 February 2015

In the next of the series, FE Trustnet looks at which are the most popular UK growth funds with the experts.

By Alex Paget,

Senior Reporter, FE Trustnet

Richard Buxton’s Old Mutual UK Alpha is the most popular UK growth portfolio with fund of funds managers, according to the latest FE Trustnet study, which also showed that the experts have been selling the likes of Nigel ThomasAXA Framlington UK Select Opportunities and Julie Dean’s Schroder UK Opportunities funds en masse over the past 12 months.

The study highlighted that Buxton’s five crown-rated portfolio is now the go-to IA UK All Companies fund for multimanagers as 42 of them count it as a top 10 holding. That represents a huge increase compared to last year’s study, which showed 26 funds had it as a top 10 holding. 

Interestingly, in this study two years ago, Buxton’s old Schroder UK Alpha Plus fund was the most popular in the sector. 

Second on the list this time around is the £3bn Majedie UK Equity fund, as it crops up in 40 top 10s, while the study also highlighted that managers have increasingly turned to passive funds for their UK exposure over the past 12 months as three trackers feature.

It must be noted, however, that we didn’t include the likes of Mark Barnett’s Invesco Perpetual funds as they only recently moved to the sector and were incorporated in an earlier instalment of this series when we looked at the most popular UK equity income funds


 

Source: FE Analytics 

Those that hold Buxton’s £2bn Old Mutual UK Alpha fund include the likes of Margetts International Strategy, four portfolios from the GAM Star range and FE Alpha Manager Bill McQuaker’s Henderson Multimanager Managed fund.

Ten portfolios from John Ventre’s various Old Mutual fund of funds ranges also count it as a top 10 holding.

Buxton, who takes a value approach to the market, is one of the best known managers in the sector and recently moved from Schroders – where he managed the UK Alpha Plus fund for more than 10 years – to Old Mutual in June 2013 to take up the post as head of UK equities.

However, he had been running his Old Mutual UK Alpha fund as a segregated mandate since December 2009.

According to FE Analytics, it has been a top quartile performer in the highly competitive sector over that time with returns of 92.34 per cent, beating the FTSE All Share by close to 30 percentage points in the process.

Performance of fund versus sector and index since Dec 2009

 

Source: FE Analytics 

While there are 58 funds in the sector which have delivered a higher return over that time, Buxton’s performance has been praised by fund experts as he has outperformed via a portfolio of mainly FTSE 100 stocks, rather than dipping into small and mid-caps to beat the market in the recent rally. 


Our data shows the fund has also been top quartile for its alpha generation, relative to its benchmark, since Buxton took charge.

Adam Parker, Chris Field and James de Uphaugh’s Majedie UK Equity fund, like last year, is the second most popular UK growth fund with multimanagers, though 10 more of them count it as a top 10 holding than this time 12 months ago.

The funds which hold it include Aberdeen Multi Manager Balanced Managed, Rob Burdett and Gary Potter’s F&C MM Navigator Moderate fund and three portfolios from Marcus Brookes and Robin McDonald’s Schroder MM range.

It isn’t too difficult to see why it is so popular, however.

According to FE Analytics, the fund has beaten both the sector and the FTSE All Share in 10 out of the last 11 full calendar years since its launch in March 2003. The exception is 2010 but it still delivered a 10 per cent return that year.

It means that since its launch, Majedie UK Equity has been a top decile performer and beaten the index by more than 160 percentage points with returns of 377.26 per cent.

Our data shows it has also been top decile for its annualised volatility, risk-adjusted returns – as measured by its Sharpe ratio – and its maximum drawdown, which shows the most an investor would have lost if they had bought and sold at the worst possible times, since its launch.

Performance of fund versus sector and index since Mar 2003

 

Source: FE Analytics 

Other top performing funds to feature on the list of most popular funds include FE Alpha Manager hall of famer John Wood’s JOHCM UK Opportunities fund, Alastair Mundy’s Investec UK Special Situations fund and FE Alpha Manager Nick Train’s CF Lindsell Train UK Equity fund – which has been top quartile and beaten the index in every full calendar year between 2008 and 2014.

However, though there are some household names within the IA UK All Companies sector, the study showed that fund buyers have increasingly been turning to passive funds for their UK exposure.

BlackRock UK Equity Tracker is now the third most popular UK growth offering with fund of funds managers as 25 of them count it as a top 10 holding, while Vanguard FTSE UK All Share Index is the fourth most popular and Fidelity UK Index is the ninth on the list as they feature in 20 and 15 top 10s.

Also, though the sector is home to FE Alpha Managers who are highly rated and have a big retail following, some of them have been largely ignored by the professionals.

No funds hold James Henderson’s Henderson UK Equity Income & Growth fund or Mark Slater’s MFM Slater Growth and Recovery portfolios, while Alex Wright’s Fidelity Special Situations fund and Schroder Recovery – which is headed up by Nick Kirrage and Kevin Murphy – are held by just one fund each, for example.

On top of that, fund of funds managers have been selling certain portfolios en masse over the past 12 months.

The best example is FE Alpha Manager Nigel Thomas’ £4.5bn AXA Framlington UK Select Opportunities fund. This time last year it was the most popular fund in the sector as it cropped up in 37 top 10s; this time around, that figure has shrunk to just 12 making it the tenth most popular.

The fund has still massively outperformed since Thomas took charge in September 2002 with returns of 321.09 per cent and it has beaten both the sector and index in eight out of the last 10 years.

However, AXA Framlington UK Opps’ relative performance has waned more recently as while it was second quartile in 2013, it underperformed in 2012 and 2014.

Performance of fund versus sector and index since Jan 2012

 

Source: FE Analytics 

That underperformance, the growing size of the fund and concerns that Thomas may soon retire could all be given as reasons for the selling, but in an article later this week we will take a closer look at the fund and see whether private investors should follow suit.


Another UK growth fund which has been shunned by the experts is Schroder UK Opportunities, which had a shocking year in 2014 as size concerns and former FE Alpha Manager Julie Dean’s departure weighed on performance.

Performance of fund versus sector and index in 2014

 

Source: FE Analytics 

The £857m fund, which is now run by Matt Hudson, is now back in the top quartile in 2015 but is now nearly £2bn lighter than it was this time last year. Also, the portfolio is now only held by one fund of funds, whereas it was the third most popular fund in the 2014 study as 29 counted it as a top 10 holding.

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