Ricketts (pictured), who currently manages seven multi-manager portfolios at Margetts Asset Management, says the fund has been his most profitable contrarian holding in a career that spans back to the early 1990s. The manager decided to buy the fund in the aftermath of the infamous split-cap crisis of the early 2000s, as he felt the fund had been unfairly de-rated despite its high yield and strong growth potential.
"We researched and invested into the Investec Capital Accumulator as the fund invested into quality split-caps with good prospects for income and growth. We took a significant position and it provided excellent returns for low-risk investors," he said.
"The split-capital investment trust sector collapsed in 2002 due to the scandal involving investment trusts, which were accused of holding each other’s shares to create a falsely high valuation."
"When this was realised, the sector plummeted in value, with many failures."
"After the sector collapsed, it was seen as toxic but in fact many of the trusts which survived were offering excellent investor value and the risk of cross holdings had now gone."
Despite the apparent toxicity of the fund, Ricketts says he bit the bullet and thankfully the gamble paid off.
"When we came in, the sector had taken a real hammering and all those cross holdings had ended up in a real mess – so no-one wanted to touch it," he said.
"However, when we bought the fund it was offering a yield of around 12 per cent, and we looked across the portfolio and saw they had a real level of coverage, so we thought they would be able to pay it."
"Despite that, because of all the bad publicity they had received, they made us sign a document saying that we knew exactly what we were getting into and that we knew the risks that were involved – basically saying that they hadn’t marketed anything to us."
"Not only did we get that high level of yield, it gave us great capital uplift in our funds. It is an example of a fund that really delivered that no-one else wanted to touch."
Investec Capital Accumulator has been managed by Alastair Mundy since August 2000. Ricketts says he bought the fund in April 2003 and sold it in late 2005.
Performance of fund Apr 2003 to Dec 2005
Source: FE Analytics
Over that two-year period the fund returned 70.62 per cent.
Investec Capital Accumulator requires a minimum investment of £1,000 and has an ongoing charges fee (OCF) of 1.34 per cent.
Turning to the future, Ricketts thinks industry stalwart Jeremy Lang’s Ardevora UK Income fund can deliver comparably high growth and income.
"It is a different type of fund to the Investec UK Split Capital fund," he said. "Ardevora UK Equity Income is run by Jeremy Lang, who showed at Liontrust that he is a very capable manager."
"During his 10 years at Liontrust, he averaged 3 per cent per annum outperformance."
"His last two years weren’t happy times and his funds struggled, which I think was due to a clash in the management team."
"However, he has launched his new fund with his own money and he has shown that his stockpicking skills remain sound. As well as generating excess returns, we really feel that equity income stocks offer that downside protection."
The Ireland-domiciled fund sits in the FSA offshore recognised universe.
According to FE Analytics, since its launch in January 2011, Ardevora UK Income has returned 33.56 per cent while its benchmark – the FTSE All Share – has returned 17.05 per cent.
Performance of fund vs sector and index since Jan 2011
Source: FE Analytics
The fund offers its investors a yield of 3.5 per cent, which derives from a predominantly large cap portfolio.
Ardevora UK Income has an annual management charge of 1.5 per cent and requires a minimum investment of £5,000.
Ricketts has consistently beaten his competitors over his long career. FE Analytics shows he has returned 164.39 per cent over 10 years while his peer group composite has returned 118.95 per cent.
Performance of manager vs peers over 10yrs
Source: FE Analytics
Among his best-performing funds are Margetts Venture Strategy and Margetts Opes Income.