AXA WF Framlington UK: April 2020 fund update

Dominic Rowles | Fri 01 May 2020

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• Chris St John is an experienced, well-incentivised fund manager
• He looks for themes that are likely to drive stock market growth over the long term and invests in companies he thinks could benefit
• We think this fund is great way to access one of our highest-conviction UK fund managers

How it fits in a portfolio

This fund could be a good addition to a long-term growth portfolio. It invests more in higher-risk small and medium-sized companies than some other funds, so works well with those focused on more established companies. The manager's focus on high-quality companies means it could also sit well alongside a fund that invests in companies believed to be overlooked and undervalued. The manager's thematic approach makes it quite different to other funds.

Manager

Chris St John is lead manager of this fund. He joined AXA Investment Managers in 2005 and has lots of experience managing funds focused on small and medium-sized UK companies. The AXA WF Framlington UK Fund was launched in 2016, and gives the manager freedom to invest in UK companies of any size.

Alongside this fund, St John also manages the AXA Framlington UK Select Opportunities Fund and the AXA Framlington UK Mid Cap Fund. He serves as co-manager on the AXA Framlington UK Smaller Companies Fund too.

We're confident he's not overstretching himself though. There's a high degree of research overlap between the four funds and St John benefits from the assistance of co-manager Dan Harlow and the rest of AXA's Equities UK investment team. He can also draw on the specialist knowledge of other AXA fund managers where necessary.

Process

The manager looks for themes that are likely to drive stock market growth over the long term and thinks about how they could change consumer behavior. Current themes include increased life expectancy, applications of robotics and low-carbon economy solutions. Then he identifies companies likely to benefit as those themes develop over time.

St John tends to invest in companies with a number of common characteristics, including high barriers to entry for competitors, the ability to raise prices without impacting demand for their products or services and an experienced senior management team. He thinks the calibre of management teams is particularly important within small and medium-sized businesses because they can have a greater influence on the company's overall success.

Meeting those managers is a critical part of St John’s investment process. First-hand information and insight allows him to test the quality of the company’s leadership, scrutinise their business model and evaluate the management team’s strategy to grow the business.

St John then invests in those companies with strong growth prospects, where he believes their potential is not fully reflected in the share price.

Culture

The company was formed in the 18th century, with the name AXA introduced in 1985. AXA bought specialist investment manager Framlington in 2005.

AXA's investment culture is based on proactivity and collaboration, with research shared across AXA's equity investment teams. Chris St John is a well-incentivised fund manager who has remained loyal to AXA for a number of years and we think he's dedicated to the UK Equity team.

The fund remains small compared to its peers in the IA UK All-Companies sector. That means it's agile enough for the manager to take advantage of opportunities when they arise.

Please note the AXA WF Framlington UK Fund is an offshore fund so investors are not protected by the Financial Services Compensation Scheme.

Cost

This fund is available at an annual ongoing fund charge of 0.59%, after a 0.17% discount available through the HL platform. We think this is an attractive price compared to other funds in the sector. The HL platform fee of up to 0.45% per year also applies.

Performance

Chris St John has repeatedly shown a talent for investing in companies with outstanding long-term growth potential. But our analysis suggests his stock picking has been particularly good amongst small and medium-sized companies. This is one of the main reasons he's significantly outperformed the broader UK stock market over his fund management career, though this should not be seen as guide to the future.

Chris St John tries to limit losses during turbulent times. The fund then has less ground to make up when markets improve. Our analysis suggests his focus on high-quality companies has helped shelter investors' money when markets have fallen but we’d expect the fund to lag the broader market when it rises quickly.

Stock markets have been volatile in recent months as the world reacted to the coronavirus pandemic. However the fund didn’t shelter investors' money as well as we'd usually expect. Investments in companies sensitive to the health of the UK economy, such as manufacturing business Melrose and house builder Taylor Wimpey, have dragged on returns.

Past performance is not a guide to the future. Where no data is shown, figures are not available. Source: Lipper IM to 31/03/2020.

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Key investor information