Buxton (pictured) will stay at the £3.5bn fund until June this year, but a replacement for the highly rated manager has yet to be announced. Hargreaves Lansdown’s Mark Dampier says there is no need for investors to sell the fund, but question marks over its future are certainly a cause for concern.
With this in mind, FE Trustnet highlights five possible alternatives to Schroder UK Alpha Plus, just in time for the ISA deadline:
Jupiter UK Growth
Richard Troue, analyst at Hargreaves Lansdown, says that FE Alpha Manager Ian McVeigh’s Jupiter UK Growth fund has many of the same traits as Schroder UK Alpha Plus.
"In some ways I’d say Buxton’s fund is quite unique, in that he’s one of the few managers that has a proven record in outperforming with a concentrated portfolio of 50 large mid and and large caps."
"One that we do like, and which is pretty similar to the Schroders fund in terms of market cap breakdown and concentration, is Jupiter UK Growth."
"Manager Ian McVeigh has been around for a long while and is very experienced."
"Like Buxton’s fund, Jupiter UK Growth has been positioned in a bullish way for some time, with a lot in banks and other companies that are sensitive to rapid economic activity. Lloyds and Barclays are among its biggest holdings."
"It’s not a massive fund, so McVeigh also has a lot of flexibility in terms of market cap," Troue added.
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
The £850m Jupiter UK Growth fund has beaten its UK All Companies sector average and FTSE All Share benchmark over one, three, five and 10 years.
Over 10 years it is up 251.22 per cent, beating its sector and benchmark by 80.54 and 69.6 percentage points, respectively.
It has fallen short of Schroder UK Alpha Plus over five and 10 years, but has a better record over one and three.
They are both more volatile than the All Share and have a significantly higher max drawdown over the long-term.
McVeigh’s biggest sector weighting is to financials, at 31 per cent. As well as Lloyds and Barclays, he holds RBS and Legal & General in his top-10. Buxton also has significant exposure to Lloyds and L&G.
Jupiter UK Growth requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.78 per cent.
Schroder UK Alpha Plus is a little cheaper, at 1.65 per cent.
McVeigh has run the fund since April 2003 and was joined this year by co-manager Steve Davies.
CF Lindsell Train UK Equity
Troue says FE Alpha Manager Nick Train’s CF Lindsell Train UK Equity portfolio is another highly concentrated alternative, but points out that the manager’s style is slightly different to Buxton’s.
"This is another manager who runs a concentrated fund as a way of adding Alpha," said Troue.
"He’s got a great track record and is if anything even more concentrated in his approach than Buxton."
"What I would say, however, is that the Lindsell Train fund is a little more long-term in its outlook, and doesn’t trade in and out as much."
"Train also has more of a focus on quality, so this is more of a defensive growth play, with a lot in consumer goods and franchises with strong and steady balance sheets."
CF Lindsell Train UK Equity has just 25 holdings. The top-10 accounts for almost 70 per cent of total assets under management (AUM), which currently stand at £612m. Train’s biggest holdings include Diageo, Unilever and Schroders.
As Troue suggests, the five crown-rated portfolio has been less volatile than Buxton’s since its launch in July 2006.
However, Train has still been able to significantly outperform the Schroder UK Alpha Plus fund, with returns of 114.26 per cent.
Performance of funds, sector and index since July 2006
Source: FE Analytics
For anyone investing directly, CF Lindsell Train UK Equity requires a very steep minimum outlay of £500,000.
However, it is available on a number of platforms for a more reasonable initial fee, including Hargreaves Lansdown and Nucleus.
Invesco Perpetual UK Aggressive
FE's head of research Rob Gleeson points to FE Alpha Manager Martin Walker’s Invesco Perpetual UK Aggressive fund as a very strong best ideas portfolio.
Unlike most of the equity funds under the management of Invesco, this one is aggressively positioned, with significant exposure to banks such as HSBC, and UK domestic plays such as Dixons and Thomas Cook. He is also overweight oil and gas.
"The manager recently repositioned the fund towards more recovery-orientated sectors such as financials, and oil and gas, meaning its performance should be less correlated to the market compared with its peers," explained Gleeson.
Like Buxton, Walker typically holds 40 to 50 stocks. Gleeson says this high-conviction way of investing means that the fund is likely to be more volatile than its benchmark in the long-run, and could see it underperform in down markets.
This has certainly been the case in the last decade. According to FE data, the fund has an annualised volatility of 16.18 per cent over the period, compared with 13.87 per cent from the All Share.
Walker’s fund is not as volatile as Buxton’s, though, which has a score of 18 per cent over 10 years.
On a total return basis, the fund is a top-quartile performer over one, three, five and 10 years. It has beaten Schroder UK Alpha Plus over all four time horizons.
The £135m fund requires a minimum investment of £500 and has an ongoing charges figure (OCF) of 1.71 per cent.
Walker has run the fund since 2001, but has only recently been made lead manager, replacing Stephen Anness.
Fidelity Special Situations
This is another high-Alpha portfolio, although this one implicitly looks to add value by investing in stocks that are under-appreciated by the wider market.
Sanjeev Shah’s £2.5bn portfolio is also significantly overweight banks, and holds HSBC, Lloyds and LSE in its top-10.
However, the fund is a touch more diversified, with a greater number of holdings.
Like Schroder UK Alpha Plus, it has a tendency to underperform during down markets. Both fell well short of the FTSE All Share in 2011, but have come roaring back since, with returns of 25.87 and 21.15 per cent respectively over the last 12 months.
Performance of funds vs index over 1yr
Source: FE Analytics
Both Shah and Buxton have been quoted recently as saying a bull market for equities has just begun.
Shah took over as manager from industry legend Anthony Bolton in January 2008. The fund is a top-quartile performer over this period, with returns of 38.19 per cent. Schroder UK Alpha Plus is up 42.7 per cent.
Fidelity Special Situations requires a minimum investment of £1,000 and has an OCF of 1.7 per cent.
A recent FE Trustnet article highlighted some of Shah’s high conviction plays that sit outside the fund’s top-10.
JOHCM UK Opportunities
This is another fund that is even more concentrated than Schroder UK Alpha Plus, with fewer than 30 holdings at present.
Like Buxton’s fund, JOHCM UK Opportunities invests in a mixture of large and mid caps, though FE Alpha Manager John Wood tends to focus on the larger constituents of the FTSE 250.
Although it is more concentrated, the fund has been significantly less volatile than both the FTSE All Share and Schroder UK Alpha Plus fund since its launch in November 2005.
It has made slightly less than Buxton’s fund over this time though, with returns of 87.9 per cent compared with 96.26 per cent.
The members of the FE Research team say the fund is very long-term in its approach, which means it is susceptible to underperformance in the short- and even the medium-term.
"The fund is managed in an absolute return manner, which means producing an overall positive return is more important than matching the performance of the UK stock market," they said.
"Wood says he doesn’t care about falling behind an index over a number of quarters, because what matters most to him is that his investors make money over the long-term."
The five crown-rated fund has a defensive feel to it at the moment, with significant exposure to the tobacco industry, for example. Imperial Tobacco and British American Tobacco are both top-10 holdings.
It is for this reason that the fund has a healthy yield of 3 per cent – very high for a member of the UK All Companies sector.
JOHCM says the £1bn fund is in the process of being soft-closed, but it still remains open to new money at the moment.
It requires a minimum investment of £1,000 and has a TER of 1.27 per cent – exclusive of performance fee.