It has been a mixed bag for the young UK funds coming into their three-year performance track record, according to the latest study from FE Trustnet, with only one achieving top quartile performance since launch.
In the final article of a series we look at the UK funds that launched in the first half of 2015 to see how they have negotiated the turmoil of the British stock market as it goes through a period of uncertainty over its future relationship with the EU.
Overall, investors have been shunning the UK since it decided to leave the European Union (EU) back in 2016.
Indeed, figures from the Bank of America Merrill Lynch fund manager survey reveal that investors have been underweight the region going back to 2014, but since Brexit was announced we have seen lows of more than 40 per cent saying they are underweight the region.
However, the British fund industry marches on and does its best to make a return for those investors who are currently invested in the region.
Included in this group are a number of new funds that are coming up to or have recently passed their three-year anniversary.
Five funds from the IA UK All Companies and IA UK Equity Income sectors launched in the first six months of 2015 and below we look at how they have performed. Please note, all performance figures are run to the end of May 2018.
First up is the IA UK All Companies sector and HL Multi Manager UK Growth, which launched on 23 January 2015.
Since this date the fund has returned 36.74 per cent, while the benchmark, FTSE All Share, gained 30.84 per cent. Compared to its average IA UK All Companies peer which returned 32.11 per cent, the fund sits in the upper end of the second quartile.
Performance of fund since launch
Source: FE Analytics
HL Multi Manager UK Growth has been managed by Hargreaves Lansdown chief investment officer Lee Gardhouse and senior fund manager Ellen Powley since inception, who have grown the fund to a size of £232m in that time.
It aims to achieve long-term capital growth through investing in other mutual funds across the cap spectrum throughout the IA UK All Companies, IA UK Equity Income and IA UK Smaller Companies sectors.
Top holdings include JO Hambro UK Equity Income, Jupiter UK Special Situations, LF Lindsell Train UK Equity, Majedie UK Equity and LF Woodford Equity Income.
Holdings are selected using in-house statistical quantitative analysis along with face-to-face meetings with fund managers.
HL Multi Manager UK Growth has an ongoing charges figures (OCF) of 1.39 per cent.
Next, we look at 7IM UK Equity Value, which has gained 25.50 per cent since its launch on 15 April 2015.
Its benchmark, MSCI UK, is up 21.11 per cent over the same period, while its average IA UK All Companies peer is up 24.33 per cent placing the fund in the second quartile of the sector.
The £173m fund is managed by the 7IM investment management team and aims to produce long-term capital growth through investing in equities.
Its top holdings include some household names such as BP, HSBC, Imperial Brands, Royal Dutch Shell, Aviva and GlaxoSmithKline.
Compared to the MSCI UK index, the fund is underweight financials, healthcare, consumer staples and telecommunication services while being overweight information technology, consumer discretionary, industrials, energy, utilities, materials and real estate.
The investment approach involves looking at value, size, price momentum, sector and market beta to achieve the required risk factor. Since launch 7IM UK Equity Value has had an average volatility of 10.58 per cent.
The fund has an OCF of 0.35 per cent and a yield of 3.80 per cent.
The final IA UK All Companies fund that launched in the first six months of 2015 is VT Castlebay UK Equity.
Since 28 January 2015 the fund has returned 31.64 per cent against its average peer's 32.51 per cent and sits in the second quartile of the sector.
Performance of fund since launch
Source: FE Analytics
Founding partner of Castlebay David Ridland is the manager of the fund, which aims to generate a return in excess of inflation plus 4 per cent annually over a rolling three-year period.
Along with achieving capital growth, VT Castlebay UK Equity aims to provide an income and has a yield of 2.6 per cent.
Ridland holds a stock on average for 10 years in his concentrated portfolio of 27 and the top 5 holdings are Victrex, Domino’s Pizza Group, Intercontinental Hotel Group, Admiral Group and Aveva Group. There is also a 9 per cent allocation to cash.
VT Castlebay UK Equity has a fund size of £31m and an OCF of 1 per cent.
In the IA UK Equity Income sector, Investec launched their UK Equity Income fund on 27 February 2015.
In the three years to the end of May, the fund has gained 24.43 per cent compared to its benchmark, FTSE All Share, which gained 27.26 per cent and its average peer’s 23.45 per cent return. Over this period, it has been a third quartile performer.
Managed by Blake Hutchins since inception, the £97m fund looks to provide an income and currently yields 2.71 per cent.
Compared to the FTSE All Share, it is overweight Unilever, RELX Group, Fidessa Group, Sage Group and KONE Corporation while being underweight Rio Tinto, Vodafone Group, BP, HSBC Holdings and Royal Dutch Shell.
Looking at sector weightings, the fund is overweight software & computer services, media, tobacco, financial services and personal goods but is underweight support services, equity investment instruments, mining, banks and oil & gas producers.
Investec UK Equity Income has an OCF of 0.85 per cent.
The last fund is TB Saracen UK Income, which launched on 31 March 2015 and is the only fund today that has produced a top-quartile return compared to its sector.
While its average IA UK Equity Income peer returned 23.86 per cent, the fund returned 29.02 per cent. However, it underperformed its benchmark, MSCI UK All Cap, by 0.58 per cent.
The fund has a bias towards small- and medium-sized companies and a high active share compared to the benchmark using a value-oriented approach.
The portfolio is concentrated and has between 25-35 holdings including top holdings Alpha Financial Markets Consulting, Imperial Brands and Standard Life Aberdeen.
Manager Scott McKenzie focuses on high and growing dividend income and currently yields 4 per cent. TB Saracen UK Income has an OCF of 1.58 per cent.
Performance of fund since launch
Source: FE Analytics