Funds run by Ninety One, Artemis and Man GLG are three of the Smith & Williamson Managed Portfolio’s core UK equity picks for the years ahead.
After being overweight US equities for eight years, James Burns, co-head of the Smith & Williamson Managed Portfolio Service, said he is reducing US equity exposure in favour of UK equities.
“We’re making sort of decent move against the US for the first time in seven or eight years,” he said.
Much of this decision was due to the amount of money printing that has happened in the US over the last year and the potential for more as the country approves further stimulus.
This has been one of the drivers of the relative weakness of the US dollar over the last year, which has been declining in value against most other major currencies.
“We were overweight the UK because we think that market is pretty cheap and things are much clearer for the UK now than they have been in the previous three or four years,” Burns explained.
“We were overweight the US for eight years, so now isn’t a bad time to slightly tilting the portfolios underweight the US.”
As such, below are the three core UK funds Smith & Williamson prefers across all its portfolios.
Ninety One UK Alpha
The first core pick Burns highlighted is the £1.8bn Ninety One UK Alpha fund, run by Simon Brazier.
“It’s a really good core holding for the UK exposure,” Burns said. “It does takes bets against the index, but they’re not titanic bets and therefore it’s a good solid core position in a portfolio.”
The fund has 47 holdings as of January and its top stock overweight positions are in Johnson Matthey, Fevertree Drinks and Ryanair Holdings. Its biggest stock underweight positions are in AstraZeneca, HSBC Holdings and Vodafone Group.
Burns also highlighted Brazier’s long term track record of outperformance. Brazier started his career at Schroders, moved to Threadneedle and became head of UK equities before eventually moving to Ninety One.
Performance of fund versus sector & benchmark over 5yrs
Source: FE Analytics
Over the last five years Ninety One UK Alpha has delivered a total return of 35.46 per cent, versus 38.75 per cent from the FTSE All Share benchmark and 40.72 per cent from the average peer in the IA UK All Companies sector.
It has an ongoing charges figure (OCF) of 0.83 per cent and currently yields 1.85 per cent.
Artemis UK Select
The next biggest UK equity allocation across Smith & Williamson Managed Portfolio Service is Ambrose Faulks and Ed Legget’s £1bn Artemis UK Select fund.
This wasn’t always one of the biggest positions but has been built up over the last few years, Burns said.
“Ed Leggett, despite being a more value-type manager, has performed very well last year,” he added. “We were happy to build this position up from being a third or fourth sized a couple years ago to being a one of the bigger ones now.
“The performance divergence was pretty significant last year, so it is doing something slightly different in the portfolio and has a manager with a good long term record.
“The way the portfolio is built, the way we the UK see market going, it could actually be pretty well positioned for a rally in the UK.”
Performance of fund versus sector & benchmark over 5yrs
Source: FE Analytics
Over the last five years Artemis UK Select has made a return of 55.58 per cent compared to 40.72 per cent from the IA UK All Companies sector and 38.75 per cent from the FTSE All Share benchmark.
It has an ongoing charges figure (OCF) of 0.94 per cent and yields 0.99 per cent.
Man GLG Undervalued Assets
The third core UK equity fund Burns highlighted was the £1.2bn Man GLG Undervalued Assets fund, run by Henry Dixon and Jack Barrat.
“Part of the reason our UK market has genuinely struggled in the last few years because we've had a bias towards more value-type managers,” Burns said.
“But we think this actually could be a positive for the portfolios going forward because we don't have a titanic tilt either way between value and growth in any part of the portfolio.
“In Japan we got a mixture of growth and more value for managers, but in the UK it's probably been a copy skewed more towards the value-type plays.”
He said Man GLG Undervalued Assets complements Artemis UK Select well because although they both have a similar value style, the Man GLG fund has more equities in the mid-cap space.
Performance of fund versus sector & benchmark over 5yrs
Source: FE Analytics
The fund has returned 33.57 per cent over the last five years, compared to a 38.75 per cent from the FTSE All Share benchmark and 40.72 per cent from the average peer in the IA UK All Companies sector.
It has an ongoing charges figure (OCF) of 0.9 per cent and currently yields 1.81 per cent.