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The top-performing UK funds headed up by industry veterans

28 April 2016

FE Trustnet takes a look at the funds in the IA UK All Companies sector that have been awarded a top five crown rating and have had the same manager at the helm for more than a decade.

By Lauren Mason,

Reporter, FE Trustnet

Seven funds in the IA UK All Companies sector have had the same manager at the helm for more than a decade and have also been awarded a top five-crown rating, according to data from FE Analytics.

It is often deemed as an attractive trait for a fund to have a manager that has been running the vehicle for a long time as, not only does this mean there is more data relating to their performance, it means they will have navigated their fund through an entire economic cycle and will have spent longer developing and refining their stock selection process.

As such, FE Trustnet takes a look at which funds in the IA UK All Companies sector have had the same manager at the helm for at least a decade and have been awarded a top five crown rating by our FE Research team in the below article:

 

Invesco Perpetual UK Strategic Income

First up is FE Alpha Manager Mark Barnett’s Invesco Perpetual UK Strategic Income fund, which is £1.1bn in size and has delivered a top-decile return over five and 10 years, more than doubling the performance of its sector average and benchmark over the last decade.

Performance of fund vs sector and benchmark over 10yrs

 

Source: FE Analytics

Over the same time frame, it is top in its sector for its annualised volatility and has achieved a top-decile Sharpe ratio (which measures risk-adjusted returns) and maximum drawdown (the most money lost if bought and sold at the worst possible times).

Barnett first joined Invesco Perpetual in 1996 after a four-year career at Mercury Asset Management. The first investment vehicle he took the helm of was the closed-ended Perpetual Income and Growth Investment Trust which he began managing in 1999. Since then, he has acquired the role of manager for seven funds and trusts, having taken over Woodford’s two flagship income funds after he left the firm.

When choosing his stocks, Barnett blends both a bottom-up selection process and a macro-thematic view – he uses this approach to seek out companies that he believes are being undervalued by the market and are likely to rebound.

Invesco Perpetual UK Strategic Income has a clean ongoing charges figure (OCF) of 0.92 per cent.

 

JOHCM UK Opportunities

Next up is the £1.6bn JOHCM UK Opportunities fund, which has been headed up by FE Alpha Manager John Wood since its launch in 2005.

The manager joined Newton as an analyst in 1995 and launched an opportunities fund at the firm, eventually becoming director of Newton’s UK Equity team and moving to Jo Hambro after 10 years at the company.

Despite having a UK mandate, Woods looks to buy into global-facing stocks that generate their earnings from overseas – the fund’s list of top 10 holdings includes the likes of Royal Dutch Shell, British American Tobacco, Unilever and Centrica.

When choosing these stocks, Woods and his team focus on the long-term macroeconomic picture and then look for companies that are set to benefit from these themes. A screening process which involves looking at balance sheet strength and market strength is then adopted, leaving the fund with a concentrated portfolio – this currently stands at 25 stocks.

Over the last decade, the fund has provided a total return of 118.87 per cent, outperforming its average peer and FTSE All Share benchmark by 59.51 and 59.99 per cent respectively. It is also in the top decile for its annualised volatility, maximum drawdown and Sharpe ratio over the same time frame.

JOHCM UK Opportunities has a clean OCF of 0.81 per cent.


MFM Slater Growth and MFM Slater Recovery

FE Alpha Manager Mark Slater’s MFM Slater Growth fund is a slightly higher-octane offering as it holds a greater proportion of stocks that are further down the cap spectrum.

As such, it has a below-average annualised volatility and maximum drawdown over the last decade. It does have a top-quartile Sharpe ratio though, which has been bolstered by the fund’s stellar returns.

The £360m fund is the top-performer in its sector over three and 10 years and is top-decile for its performance over five years.

Over the last decade it has provided a total return of 231.88 per cent, more than tripling its sector average.

Performance of fund vs sector over 10yrs

 

Source: FE Analytics

Slater launched the fund in 2005, 11 years after he co-founded Slater Investments. The firm also runs a hedge fund, two further unit trusts and portfolios for high net worth individuals, charities and large pension schemes.

Slater Recovery – one of these unit trusts – is actually the fourth fund on the list to have been run by the same manager over 10 years and receive a five crown rating.

Both funds are of course run similarly despite their respective growth and recovery biases. Slater chooses stocks using a bottom-up stock selection process and is able to invest some of the funds’ weightings in overseas companies. Examples of stocks that are held across both funds include Bellway, Walt Disney, Hutchison China Meditech and Alliance Pharma.

MFM Slater Growth has a clean OCF of 0.8 per cent and MFM Slater Recovery has a clean OCF of 0.82 per cent.

 

Royal London Sustainable Leaders Trust

FE Alpha Manager Mike Fox’s Royal London Sustainable Leaders Trust was launched in 1990 as part of The Co-Operative Asset Management, which was then acquired by Royal London in 2013.

Fox began running the fund in 2003 and, over this time frame, the £434m fund has provided a total return of 225.61 per cent compared to its sector average’s return of 146.43 per cent.

In terms of its risk metrics, the fund is in the top quartile for its annualised volatility and its Sharpe ratio, although its maximum drawdown is 41.63 per cent, which is higher-than-average compared to the sector.

Fox combines in-depth financial analysis alongside environmental, social and governance analysis when selecting stocks for his portfolio, which currently stands at 42 holdings.

He looks for companies that have been undervalued by the markets and mostly opts for blue-chips – some of his largest positions at the moment are BT, GlaxoSmithKline and Unilever.

The manager and his team’s ethical screening process leaves just 100 to 150 companies within their entire investment universe to buy into – Fox is only interested in stocks that either positively benefit society through its products or services or companies that are leaders in sustainable business practises. 

Royal London Sustainable Leaders Trust has a clean OCF of 0.77 per cent.


SVM UK Growth

SVM UK Growth is headed up by Margaret Lawson, who is a co-founder of SVM and has been at the helm of the fund since 2005.

The £142m fund consists of three investment buckets – core, tactical and alpha kicker. The core stocks, which account for just over half of the portfolio, are those that are deemed to have strong company fundamentals and should provide solid growth over the long term. This bucket includes the likes of Ryanair, Paddy Power Betfair and DCC.

The tactical bucket makes up 44.4 per cent of the fund and holds stocks that are likely to benefit from broader macroeconomic themes, while the alpha kicker bucket holds flawed stocks with promising turnaround stories.

Over the last decade, SVM UK Growth has provided a total return of 148.9 per cent, outperforming its sector average and benchmark by 90.02 and 89.54 percentage points respectively.

Performance of fund vs sector and benchmark over 10yrs

 

Source: FE Analytics

While it is in the top decile for its risk-adjusted returns and its maximum drawdown over this period, it has provided an above-average annualised volatility.

SVM UK Growth has a clean OCF of 1.08 per cent.

 

SVM UK Opportunities

The final fund on the list is SVM UK Opportunities, which has been managed by Neil Veitch since the start of 2006.

The £122m fund invests in securities that the manager deems to be mispriced and that are being undervalued by markets. His preference is for companies that have endured a challenging period over the short term but are showing strong signs of recovery – these are picked up through meeting with companies face-to-face and asking managers about their firm’s customers, suppliers and competitors.

The fund has delivered a strong performance over Veitch’s tenure, having almost doubled the performance of its benchmark and its sector average.

However, the fund is highly volatile – it has the second highest annualised volatility in the IA UK All Companies sector and has a maximum drawdown of 65.65 per cent, which is the highest in the sector.

“Historically, this has not been a fund for the timid,” the Square Mile Research team, who awarded the fund an ‘A’ rating, said.

“The fund suffered bruising underperformance during 2008 only to leap back to life as the stock market recovered in 2009. Few investors are looking for such excitement, not least Mr Veitch, and over recent years the manager has introduced various changes to the way he constructs his portfolio in an attempt to moderate volatility.”

According to the team, this process has included increasing portfolio diversification, focusing more on larger companies and introducing a short component to the portfolio

SVM UK Opportunities has a clean OCF of 1.08 per cent.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.