18
FUND SELECTOR UK EQUITIES
Top ranked funds Three-year performance
“ We like the extent
to which the [GLG]
managers combine
both a top-down and
bottom-up investment
approach and have
shown an in-depth
understanding of how
to manage risk and
contain the volatility
of the fund
”
FUND SELECTOR’S
COMMENT PETER
TOOGOOD, INVESTMENT
SERVICES DIRECTOR,
OBSR
The best over three years
category – in stark contrast
to the other categories – is
dominated by active funds.
There is also a skew towards
large-cap-biased funds.
Additionally, only the Dexia
and Waverton funds have
assets under management
in excess of £50m, and four
of the funds have less than
£3m under management,
with no fund size quoted in
a further two. This could be
indicative of the fact that
offshore investors tend to
think of UK investments in
a European context, preferring
Pan European funds to
UK only mandates.
The GLG UK Select
Equity Fund is managed by
John White and Jason
MacKay, who have been
managing both long only
and absolute return mandates
since September
2004. It is important to
note that the returns of this
fund are hedged into euro,
thus comparisons versus
unhedged funds are not
Top 10 UK equity funds by 3-year performance
directly relevant, particularly
given the recent
strength of the euro, which
over three years has gained
around 25% relative to sterling.
Notwithstanding this
fact, the managers adopt
an active approach, are
primarily focused on large
cap equities and combine
a top-down approach with
bottom-up stock selection.
The fund is a high-conviction,
concentrated portfolio
and is unconstrained
by the index. Looking
ahead they believe that a
continued chase for yield
will drive investors back
into equity markets and
that this will be the biggest
driver for equities in 2010.
Furthermore they believe
that large, in particular
mega, caps currently trade
at a record low PE multiple
relative to mid caps, which
could result in large caps
once again outperforming
both mid and small.
We like the extent to
which the managers combine
both a top-down and
bottom-up investment
approach and have shown
an in-depth understanding
of how to manage risk and
contain the volatility of the
fund. We would however
caution investors to the
euro hedge that is applied
to the offshore fund as this
may impact significantly
on returns.
The Waverton UK Fund
was launched in early 2007
and is managed by Russell
Wallis and Simon Wilson.
One of the features of
Top 10 funds – risk and return
20
Newton OSF UK Equity
10
Barclays MultiManager
GLG UK Select Equity M
0 UK Opps B
CLI Schroder Income A
Aviva UK Equity Int SWI UK Equity
-10
MM UK Eq A £ CLI Schroder UK
Alpha Plus A
-20
Waverton UK B £
-30 Dexia Eqs L UK C Acc Sector average
6
7 8
Standard deviation (%)
9 10
To 5 Jan ’10. Bid to bid, $, gross inc, no cap. Source: Morningstar
the fund is that the managers
adopt an option overlay
strategy, predominantly
writing covered call options
and stock substitution, in
order to enhance returns.
The fund is managed with
a total return mentality and
ordinarily one would have
anticipated that the option
overlay strategy would
provide the managers with
some ability to protect the
fund on the downside,
although this was not evi-
3-year 3-year 3-year 3-year 3-year 3-year M’star Fund Dom
% chg Alpha Beta R² Sharpe volatility Ratings size (£m)
GLG UK Select Equity M 26.68 1.39 1.03 0.75 0.04 8.23 ★★★★★ N/S Ireland
Newton OSF UK Equity -10.49 0.18 0.87 0.95 -0.1 6.11 ★★★★ 19 Jersey
CLI Schroder Income A -12.49 0.28 1.01 0.87 -0.09 7.49 – 1.95 IoM
Barclays MultiManager UK Opps B -12.71 0.11 0.87 0.93 -0.11 6.19 ★★★★★ N/S Ireland
Waverton UK B £ -13.65 0.2 1.02 0.97 -0.1 7.15 ★★★★ 73.46 Ireland
SWI UK Equity -13.77 0.28 1.04 0.92 -0.09 7.49 ★★★★ 0.82 Jersey
Aviva UK Equity Int -13.95 0.11 0.92 0.93 -0.11 6.58 – 3.06 Ireland
Dexia Eqs L UK C Acc -14.24 0.13 0.95 0.98 -0.11 6.6 ★★★★ 77.45 Lux
CLI Schroder UK Alpha Plus A -15.64 0.37 1.22 0.93 -0.09 8.73 – 1.94 IoM
MM UK Eq A £ -16.36 0.16 1.06 0.93 -0.11 7.59 ★★★★ 38.8 Ireland
5 Jan ’07 – 5 Jan ’10. Bid to bid, $, gross income, no cap. Source: Morningstar
dent in 2008 when the
fund underperformed the
FTSE All Share index slightly.
Since launch, however,
the fund is ahead of
the index.
The CLI Schroder UK
Alpha Plus Fund is managed
by Richard Buxton,
who heads a four-member
specialist UK team at
Schroders with a collective
focus on specialist and
institutional high performance
mandates.
The fund is a high conviction
20-40 stock portfolio
that tends to invest predominantly
in large-cap
stocks. Philosophically, the
manager tends to be a contrarian
investor and is prepared
to wait for long-term
ideas to come to fruition.
His contrarian and longterm
orientation can result
in higher than average
levels of volatility and lead
to extended periods of
short-term underperformance.
However, we have
confidence in his ability to
generate strong returns.
INTERNATIONAL ADVISER [www.international-adviser.com] FEBRUARY 2010
Return (%)
30
Top 3-year performers vs index
%
40
20
0
-20
-40
CLI Schroder Income A
-60
FTSE AllSh TR £
Jan ’07 Jul Jan ’08 Jul
Source: Morningstar
GLG UK Select Equity M
Newton OSF
UK Equity
Jan ’09
Jul
Jan ’10
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