LF Majedie UK Equity: April 2020 fund update

Dominic Rowles | Thu 30 April 2020

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  • This fund's unique structure combines the best ideas of four fund managers, whose strengths and styles are carefully blended together
  • We like the fund's flexible approach, which means the managers are free to invest wherever they see the best opportunities
  • They have a good long term track record, with particularly strong stock picking skills for larger companies

How it fits in a portfolio

The best ideas of an experienced team, combined with their willingness to invest differently from the herd, makes this fund stand out from other UK growth funds. We think it's a good all-rounder for the UK part of a portfolio. It could sit well alongside other funds that invest more overseas.

Manager

The fund is managed by a team of four. Each manager has their own strengths, styles and areas of focus.

James De Uphaugh and Chris Field have been analysing and investing in UK companies for more than three decades. They were both founding members of Majedie Asset Management and have served as co-managers on the fund since launch in 2003. Imran Sattar joined the team in 2018 and has more than two decades' experience in UK equities. The trio are each responsible for 30% of the portfolio, and focus primarily on large and medium-sized businesses.

John King joined Majedie in 2019. He previously served as a fund manager at AXA, where he worked alongside well-regarded fund manager Chris St John. King is responsible for 10% of the portfolio, and focuses on higher-risk smaller companies.

We're mindful there have been a number of team changes in recent years, but encouraged longstanding fund managers James De Uphaugh and Chris Field remain central to the strategy and are dedicated to Majedie.

Process

The team at Majedie use a relatively flexible investment process on this fund. Each manager is given the freedom to invest according to their own strengths and styles, which are carefully blended together. This means the fund combines more established companies that have consistently grown profits, with those that have been through a difficult time and have the potential to recover.

The managers don’t focus on any particular sectors. They prefer to adopt a whole-of-market approach as this reduces the risk that managers will have blinkered views in favour of their own sectors. The managers also spend time thinking carefully about how economic changes can impact the companies they invest in, and this is built into their analysis.

The team draw on a broad range of tools when coming up with investment ideas, including in-house systems and technical models perfected through decades' of experience. Key to their investment process is regular meetings with company management. The meetings allow the team to probe management and glean insights that aren't available through the report and accounts.

The fund currently has a small bias towards 'value' companies – those that the managers believe can be bought at a discount to their true worth. They've also found plenty of opportunities in the industrials sector.

Industrial product distributor Electrocomponents has been held in the portfolio for a number of years. The company has distribution networks across Asia and Europe so, having dealt with health crises in Asia, it was well prepared for the current one. The company won't be immune from the effects of coronavirus, but the managers think it's a well-run business that could emerge stronger.

The panic around coronavirus has caused volatility in recent weeks, but the managers think it's a great opportunity to spot companies that have been unfairly overlooked by other investors. They've recently made a new investment into online car dealer Auto Trader. The managers think it has a great opportunity to grow its share of the used car market, and it will become increasingly difficult to compete with.

Culture

We like the fact the managers are focused on company analysis and fund management. Other administrative, compliance, and marketing tasks are carried out by other teams at Majedie, and we think this support is a bonus.

Each permanent Majedie employee owns shares in the business. We think this helps employees think like business owners and incentivises them to work hard, for the good of the business. It also ensures that decisions are taken with the long term health of the business in mind. The fund managers invest a significant amount of their money in their own funds and we think the structure of their incentivisation should mean they stick around for the long term. That said, there have been some departures from the team in recent years, so we continue to monitor this closely.

Another key part of the Majedie culture is 'responsible capitalism'. The team uses their right to vote at company Annual General Meetings (AGMs) and actively engages with the companies they invest in to push them to be the best they can be across every aspect of their business.

Cost

This fund is available at an annual ongoing fund charge of 0.55%, after a 0.10% discount available through the HL platform. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.45% per year also applies.

Performance

The managers have a good long term track record and have outperformed the broader UK stock market over the long term. The fund's tended not to fall as far when markets are weak, and perform broadly in line with the UK market when it's rising. Our analysis suggests the managers' stock picking has been particularly strong amongst larger companies. They've also added value by investing in strongly performing areas, such as the technology sector. You should remember that past performance is not a guide to the future. Like all investments, the fund can fall as well as rise in value so investors could get back less than they invest.

The fund hasn't done as well as the UK stock market in recent years. The managers have tended to focus on companies whose share prices they believe don’t reflect their true worth. These companies largely remained out of favour with other investors, which held back returns.

The fund's also underperformed the broader UK stock market so far this year*, as the world reacted to the coronavirus pandemic. One of the weakest performers was transport operator FirstGroup. The company was in the middle of selling its US operations and the virus caused them to put the sale on hold. However following conversations with the company's management team, the managers are confident that the sale can be completed once coronavirus restrictions are lifted.

Annual percentage growth
Mar 15 -
Mar 16
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
LF Majedie UK Equity -7.0% 25.6% -3.1% 2.9% -21.3%
FTSE ALl-Share -3.9% 22.0% 1.2% 6.4% -18.5%

Past performance is not a guide to the future. Source: *Lipper IM to 31/03/2020.

Find out more about this fund including charges

Key investor information

Important information

Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice.

No news or research item is a personal recommendation to deal.

Hargreaves Lansdown Asset Management is authorised and regulated by the Financial Conduct Authority.

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