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The UK fund manager emulating Warren Buffett – and doing so successfully

22 July 2014

Keith Ashworth-Lord explains why he has chosen to follow the “Sage of Omaha’s” investment philosophy and why it has, so far, helped him to top his IMA sector.

By Alex Paget,

Senior reporter

Keith Ashworth-Lord’s Premier ConBrio Sanford Deland UK Buffettology fund has been one of the best performing UK equity funds since its launch in March 2011, with the manager attributing that performance to the investment principles of legendary US investor, Warren Buffett.

While it is still early days, the now £17.8m fund has been a top decile performer in the IMA UK All Companies sector over that time with 57.27 per cent, nearly doubling the returns of the FTSE All Share in the process, according to data from FE Analytics.

Performance of fund vs sector and index since Mar 2011


Source: FE Analytics

As FE Trustnet highlighted last week, that margin of outperformance has led to the Buffettology fund getting a five crown-rating by FE at the first time of asking

Though the fund itself has only a three year track record, Ashworth-Lord, who previously worked as an investment analyst and stockbroker, has been mirroring the “Sage of Omaha’s” investment strategy within his own personal portfolio since the 1990s.

“After 15 years in the business, I had a pretty decent sized portfolio but I didn’t have an anchor. I kept flip-flopping from one investment style to another,” Ashworth-Lord (pictured) explained.

“I said to myself, I need to get an investment philosophy nailed down. It was through that that I bumped into Jeremy Utton, who I worked with on investment research publication ‘Analyst’, and we had both been rigorously analysing the Buffett Style.”

ALT_TAG “We went at it like a couple of converts and we really bought into long-term value investing.”

Having attended numerous Berkshire Hathaway AGMs and eventually meeting the man himself, Ashworth-Lord was contacted by David Clark and Mary Buffett, the authors of various “Buffettologist” books, in February 2009 and given exclusive rights to Buffett name and a 10-year licence period to copy the investor’s distinct long term, value-orientated approach within a UK equity fund.

Ashworth-Lord says that there are a number of key aspects a company must have for it to make it into his highly-concentrated portfolio. He currently holds just 27 companies, adhering to Buffett's theory that it's much better to hold a handful of great companies you understand rather than a bucket-load for the sake of diversification.

“When you boil it down, there are three main things I look for in a company,” he said.

“Firstly, I want an enduring franchise or really well established business. Basically, think of them as a castle with a moat around them. These are either household names or have a unique product and they should have good growth prospects.”

“Crucially, they must have pricing power because if they don’t and inflation picks up, they will get hammered.”

“Secondly, I’m looking for companies that generate a high return on capital employed – that is crucial for me. Thirdly, I’m looking for companies that generate cash like salt mills. Within that, special dividends are important and good examples of that are Domino’s Pizza and James Halstead; if they generate any surplus cash, they hand it back to shareholders.”

The other over-riding factors he looks for in a company is the quality of its management team and, even more importantly than that, making sure you he buys a stock at a price that “makes sense”.

This process has worked so far. The fund delivered top quartile returns in 2012 and 2013 and is top decile for its information ratio, alpha generation and sharpe ratio since its launch more than three years ago. Consistency is indeed something that has defined Buffett's success over the years.

Premier ConBrio Sanford Deland UK Buffettology
 has also had the lowest annualised volatility in IMA UK All Companies sector over that time.

Though Ashworth-Lord has been pleased with the performance of the fund, he says he has had to face a number of difficult issues.

“To be brutally honest, the initial fundraising was a disaster. The AUM was still only £2m after two years and I thought it would be around £15m straight away,” he said.

“I think most people will only invest in a fund when it has a three year track record, but we were very slow at building up AUM. That meant that the TER [total expense ratio], or OCF [ongoing charges figure], was horrendous for the first year as I was battling against charges of around 8 per cent.”

“The reason why they were so high was because our third party providers all have minimum hurdle fees, so as we saw more inflows the charges have come down. However, it was a real headwind we had to deal with so I am really pleased that the fund performed like it did.”

The fund's OCF has come down to 1.94 per cent, but that figure is still significantly higher than the average fund in the sector. He says that if the fund continues to grow, the charges will keep falling.

Ashworth-Lord says he tries to stick to Buffett’s investment philosophy as close as possible, but there are ways in which it differs.

For example, the manager says that given Buffett’s status and the amount of money he runs, the chairman of Berkshire Hathaway is presented with opportunities – such as with General Electric and Goldman Sachs – that he could never hope of getting.

However, he has had a number of companies that have performed very well for him.

One example is Trifast, the FTSE AIM-listed industrials company, which is his largest individual holding, making up 5.42 per cent of his fund.

The company designs, manufactures and distributes industrial fastenings to businesses across the world and, according to FE Analytics, it has returned more than 200 per cent over two years.

Performance of stock vs index over 2yrs


Source: FE Analytics

The stock was also tipped by FE Alpha Manager Mark Slater, who has recently bought the £140m company for his MFM Slater Recovery fund.

While ConBrio Sanford Deland UK Buffettology has outperformed over the medium term, it has had a tough time this year. Our data show that the fund has failed to replicate its top quartile returns in 2012 and 2013 and is currently down against the sector in 2014, with losses of 1.4 per cent.

Performance of fund vs sector in 2014


Source: FE Analytics

The manager attributes those losses to stock-specific issues but says he is confident that his fund will continue to outperform from here.

“I haven’t bought any new stocks this year,” he explained.

“Some of my companies had performed very well last year. I have just added to existing holdings when there has been some nonsensical share price falls, like International Personal Finance in December and when Games Workshop fell out of bed in January.”

“My cash weighting is now 10 per cent and I have done that deliberately because I haven’t been happy with current valuations in the market. I’ve felt it best that I build up a bit of firepower to jump on opportunities if anything happens in the market.”

“Though the fund hasn’t performed as well this year, it isn’t something I’m overly fussed about. I think a breather was needed so that my companies’ operating results could catch up with their share prices.”

The fund is very much a UK all-cap portfolio. Currently, Ashworth-Lord owns two FTSE 100 companies, nine FTSE 250 companies, eight FTSE Small Cap/FTSE Fledgling companies and the rest of the fund is made up with FTSE AIM stocks.

His top-10 holdings include Dixons, Liontrust Asset Management, Dart Group and International Personal Finance. His largest sector bets are industrials, services and financials.


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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.