LF Majedie UK Income - new manager, similar approach
Dominic Rowles | Fri 12 July 2019
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- Mark Wharrier took control of this fund in November 2018
- He invests in companies overlooked by others but with the potential for a turnaround
- We currently have more conviction in other funds in the UK Equity Income sector
The LF Majedie UK Income Fund was removed from the Wealth 50 (then the Wealth 150) list of our favourite funds in May 2018 following the announcement that experienced fund manager Chris Reid was stepping down. Reid's co-manager, Yuri Khodjamirian, recently announced he was leaving the company too.
The fund's now managed by Mark Wharrier. He has a lot of experience working on equity income funds. Most recently he was part of the UK Income team at Troy Asset Management. Prior to that he was lead manager of the BlackRock UK Income Fund.
He has the support of the talented UK Equity team at Majedie, as well as recently appointed co-manager Mike Totton.
We think the fund remains a reasonable option for exposure to UK companies with the potential to deliver a growing income over the long term. But we currently have more conviction in other funds in the UK Equity Income sector. These can be found on the Wealth 50.
How do the managers invest?
Wharrier and Totton use a similar approach to their predecessors. They invest in companies overlooked and underestimated by other investors but with the potential to grow earnings faster than expected. Many of these companies are going through periods of change which other investors are yet to appreciate.
They like to see early signs of improvement before buying in though. This helps avoid owning shares in a struggling business which is unable to recover.
The fund tends to invest in a relatively small number of companies. This means each one can contribute significantly to returns but it increases risk too. The managers also use their freedom to invest up to 20% of the fund overseas.
Company in focus: Travis Perkins
Travis Perkins is one of the UK's leading builders' merchants. Its share price struggled in recent years though because it tried to expand into different areas but lost focus on its main business.
The company recently announced plans to sell some of its more niche businesses and implement cost-cutting measures. Meanwhile Travis Perkins-owned tool supplier Toolstation has grown earnings significantly in recent years. The managers think these points are being overlooked by other investors and took the opportunity to invest at what they consider to be a low share price.
How's the fund performed?
The fund's grown 0.7%* since Wharrier took control in November 2018, while the broader UK stock market rose 7.0%. This is a short time period though and you should remember past performance isn’t a guide to the future.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Jun 14 -
Jun 15 |
Jun 15 -
Jun 16 |
Jun 16 -
Jun 17 |
Jun 17 -
Jun 18 |
Jun 18 -
Jun 19 |
|
| LF Majedie UK Income | 14.8% | -8.4% | 20.9% | 12.8% | -5.9% |
| FTSE All-Share | 2.6% | 2.2% | 18.1% | 9.0% | 0.6% |
Past performance is not a guide to the future. Source: *Lipper IM to 30/06/2019
One of the fund's worst performers was Vodafone, which faced concerns over increasing costs and falling customer loyalty. An investment in broadcaster ITV also performed poorly amid concerns over falling advertising earnings. Shares in both companies were later sold from the fund.
Stronger performers included financial services business Legal & General and Swiss multinational healthcare company Roche.