When investors think of Troy Asset Management, it is normally the likes of Francis Brooke and Sebastian Lyon who come to mind. 
This is understandable, given that both managers have considerably outperformed their peers over the long term but have done so without exposing their investors to huge amounts of volatility, risk or drawdown.
However, the fund house is also home to a number of other managers who have quietly gone about their business of beating the market.
One of those is Tom Yeowart. While his track record is still very short, his £85m Troy Spectrum fund (which is a fund of funds) has been a top quartile performer in the IA Flexible Investment sector since he took charge in September 2014 – a period which has seen a substantial amount of market volatility.
Performance of fund versus sector and under Yeowart
Source: FE Analytics
Like other managers at Troy, Yeowart (pictured) is all about not exposing his investors to too much risk and therefore when building his portfolio, he looks for managers who he believes are “excellent custodians of capital”.
Therefore, in this article, he highlights five of his favourite funds from the mainstream equity sectors.
In the UK – Evenlode Income
Yeowart has a huge range of talent to pick from in the UK equity space, but says Hugh Yarrow’s five crown-rated Evenlode Income fits well in his portfolio due to the manager’s strategy of buying quality companies.
“We have had several meetings with Hugh Yarrow and Ben Peters and I very much like their process. They tend to focus on high quality, cash generative businesses which have very reliable earnings – but they also have a valuation angle as well,” Yeowart said.
Yarrow’s process leads to running a very concentrated portfolio of 35 stocks. He has a high weighting to certain large-cap sectors such as consumer goods and healthcare, but he completely avoids the likes of mining, energy and banks as a result.
This has worked well for him as the £292m fund has been a top decile performer in the IA UK Equity Income sector since its launch in October 2009 with returns 99.98 per cent, beating the FTSE All Share by 35 percentage points in the process.
Performance of fund versus sector and index since launch
Source: FE Analytics
It is also top decile for its annualised volatility, downside risk, maximum drawdown and risk-adjusted returns since launch and the fund (which currently yields 3.8 per cent) has grown its dividend in every year over that time.
Evenlode Income has a clean ongoing charges figure (OCF) of 1.12 per cent.
In Europe – E.I. Sturdza Strategic Europe Value
Yeowart isn’t afraid to look off the beaten track for his “excellent custodians of capital” and Willem Vinke’s E.I. Sturdza Strategic Europe Value fund is an example of that.
The €485.7m fund sits in the offshore FCA recognised universe, but Yeowart says investors are missing a trick by not taking a step back and looking outside of the Investment Association sectors for opportunities.
“[Vinke] has a very good long-term track record as he has captured some 110 per cent of market upside but only around 75 per cent of the downside. He manages a fairly concentrated portfolio (30 stocks) and I like my managers to have courage in their conviction.”
“Again, he favours higher quality businesses with greater predictability of earnings and cashflow.”
Vinke launched the fund in October 2010 and over that time it has returned 97.94 per cent, meaning it has doubled the returns of its benchmark – the MSCI Europe index – over that period. As a point of comparison, E.I Sturdza Strategic Europe Value has beaten every fund in the IA Europe ex UK sector since inception.
The fund has also beaten its benchmark in every calendar year since launch and is outperforming so far in 2015 with gains of 15.41 per cent.
The fund, which is a multi-cap portfolio with a current bias towards mega-caps, has an OCF of 1.14 per cent.
In Japan – CF Morant Wright Sakura
Japanese equities have been all over the place in recent years, with foreign investors piling into the market when ‘Abenomics’ appears to be working and then pulling their money out when data seems less than positive.
Therefore, for his exposure Yeowart likes Japanese managers who can focus on the bottom-up fundamentals which means that (theoretically) they can gradually outperform no matter what.
This has led him to the £193 CF Morant Wright Sakura fund, which takes a value approach to the market.
“It mainly focuses on mid-caps. This means the fund is more domestically orientated and the managers look for companies which are trading on very low price to book multiples but have a great deal of cash on the balance sheet,” he said.
According to FE Analytics, CF Morant Wright Sakura has returned 17.01 per cent since its launch in May 2013, compared to a 9.84 per cent gain from the MSCI Japan index.
Performance of fund versus sector and index since launch
Source: FE Analytics
Again, the fund sits in the offshore universe, but FE data shows it has outperformed the IA Japan sector average by more than double – meaning it has beaten all but six members of the peer group over that time.
It has an annual management fee of 1 per cent and doesn’t charge a performance fee.
In the US – Heptagon Yacktman US Equity
The US has been a very difficult place of active managers and that trend has certainly continued over recent years as the rally in the country’s equity market has largely been driven by the biggest and most researched members of the index.
Yeowart likes the Heptagon Yacktman US Equity fund for his exposure, due to the experience of its manager Don Yacktman. The manager has a very good long-term track record (having launched his firm in 1992) and given the toppy valuations on offer, he thinks Yacktman is well positioned to outperform.
“Clearly over the last five years, the re-ratings in the market have raised all boats but we are starting to see greater dispersions in valuations and in equity market returns. Yacktman has a value tilt, but tends to focus on high quality large-caps like PepsiCo and Procter & Gamble.”
“He will also raise cash levels when he sees little value and because of the strong re-ratings, he is currently holding around 17 to 18 per cent in cash.”
Unfortunately, our data on the $1.2bn Heptagon Yacktman US Equity fund only spans back to the January 2011. Over that time it has underperformed against the S&P 500 with returns of 50 per cent, some 30 percentage points lower than the index.
Those returns are likely to have been hindered by the manager’s high weighting to cash. In a world of growing stock performance dispersions, though, Yeowart thinks the fund will start outperforming again.
It has a total expense ratio of 1.68 per cent.
In emerging markets – PFS Somerset Emerging Markets Dividend Growth
Yeowart likes to focus on funds with a quality bias for his emerging markets exposure and therefore holds the likes of Jonathan Asante’s First State Global Emerging Markets Best Ideas fund – which is a 10 stock portfolio of the manager’s highest conviction bets from his Global Emerging Markets Leaders fund.
It is only owned by Troy and one other institutional investor, though, so Yeowart uses FE Alpha Manager Edward Lam’s five crown-rated PFS Somerset Emerging Markets Dividend Growth fund alongside it in his portfolio.
Lam takes a very bottom-up approach to the market and (like the other fund’s mentioned on this list) runs a highly concentrated portfolio (of 40 stocks) of high quality, cash generative companies which aim to deliver a growing source of income.
He also builds up cash when stocks fail to meet his criteria and the manager therefore has some 15 per cent outside of the market at this point in time.
According to FE Analytics, it has been a top decile performer in the IA Global Emerging Markets sector since its launch in March 2009 with gains of 23.79 per cent. Its MSCI Emerging Markets benchmark, on the other hand, has lost 3.62 per cent over that time.
Performance of fund versus sector and index since launch
Source: FE Analytics
It has also had the best risk adjusted returns, lowest maximum drawdown and generated the highest amount of alpha relative to its benchmark in the sector since inception.
The £930m fund does only yield 0.7 per cent at this point in time, though, and has tended to generate less income than many of its dividend-paying rivals in the peer group. It has a clean OCF of 1.3 per cent.
