Five fund picks to replace Schroder UK Opps
Dean had over a decade of experience running money for Cazenove prior to the group’s takeover by Schroders last year, and had built up an enviable track record at the helm of the £2.2bn Schroder UK Opportunities fund.
She has consistently outperformed using her renowned business cycle investment process, which sees the team actively allocate to stocks depending on their place in a four-stage business cycle.
Dean’s three and five-year numbers of 82.5 per cent and 126.1 per cent place her in the top quartile, well ahead of the average return of 56.9% over three years, and 79.2 per cent over five years (according to Morningstar).
There has been a dip in her performance over the last year however, with the fund moving from top to bottom quartile.
Matt Hudson has taken over the fund with immediate effect, as well as the Luxembourg-domiciled Schroder ISF UK Opportunities fund, which Dean also managed. In total, she ran around £3.5bn across her mandates.
So who is best placed to replicate – or even beat – Dean’s performance? Below, fund buyers name five managers they see as alternatives to Dean.
1. Standard Life Investments UK Equity Unconstrained
1yr return 9.1 per cent
5 year return 148 per cent
Ed Legget has been running the fund since 2008, having taken it over from Wesley McCoy.
Legget has built an impressive track record on the £1.1bn fund, which has returned 90 per cent over three years versus a sector average of 57 per cent. The portfolio is concentrated and currently holds 51 stocks without reference to index weight or size, and may use derivatives to achieve its objective of providing long-term growth.
Square Mile managing director Richard Romer-Lee said: “It is difficult to find something that is exactly the same as Julie Dean’s portfolios, because of the business cycle approach she employed. However, Legget’s fund has an unconstrained, team based investment approach and performance has been strong.”
2. Artemis UK Special Situations fund
1 year return 7 per cent
5 year return 73 per cent
Derek Stuart’s fund is another popular fund, with over £1bn in assets and a similar unconstrained, multi-cap approach to Dean’s fund.
Performance has lagged Dean over the longer-term, with less emphasis on the macro picture and more focus on bottom-up stock selection.
Typically running around 40 per cent in large caps, meaning he has similar risk characteristics to the UK stock market, Stuart nonetheless also has sizeable positions in mid and small-cap stocks.
Schooling Latter said: “Derek is a highly capable fund manager who brings a wealth of experience to the table. The fund has been remarkably consistent during his 13 years at the helm and he has demonstrated he can add value across a range of market conditions.
“For investors wanting a core UK equity holding this fund may well fit the bill.”
3. Jupiter UK Growth fund
1 year return 8.3 per cent
5 year return 93 per cent
Ian McVeigh (pictured) and Steve Davies’ £1.1bn Jupiter UK Growth fund has an enviable track record, beating peers over one, three and five years.
A concentrated portfolio of around 30-40 stocks – it currently has 41 holdings – it shares the same multi-cap approach as Dean’s fund. However, Dean’s fund has become more diversified recently, with over 60 positions in play at present.
As a result, Jupiter UK Growth has a lower correlation to the FTSE All Share, and has delivered a better risk-adjusted return over the last year.
However, the portfolios do share similarities, both focussing on bottom-up stock selection as well as the macro picture.
Schooling Latter said the process, whereby the managers identify both growth and recovery stocks through fundamental analysis, has evolved over time, becoming more successful.
“The managers have stripped away parts of the process that were less successful, and the result is a fund that has performed well in a wide range of market conditions,” she said.
4. Old Mutual UK Alpha
1 year return 6.3 per cent
5 year return 86 per cent
Richard Buxton was able to take his track record to Old Mutual Global Investors when he left, having run a mirror version of his portfolio for the group.
Dean was seen as a natural replacement for Buxton when she moved to Schroders, but their investment styles are very different.
While both have impressive long-term track records, comfortably ahead of the index, Dean’s main spell of outperformance has come after the financial crisis of 2008, whereas Buxton is more consistent over the long term.
A concentrated fund which will run between 35-40 positions, its risk profile is greater than the index and Dean’s fund.
Schooling Latter said the higher-risk approach had paid off for Buxton over the long-term.
“A high conviction growth fund from a manager who has shown considerable skill in all types of equity markets, Richard has an excellent long-term track record,” she said.
5. Fidelity Special Situations
1 year return 2.9 per cent
5 year return 57 per cent
An interesting choice given new manager Alex Wright has been at the helm for less than a year, the fund is nonetheless showing signs of a turnaround after former manager Sanjeev Shah handed over the portfolio.
The £2.8bn fund’s objective is to achieve long-term growth by investing primarily in the UK market, and may also use derivatives and forward transactions.
The fund has lagged competitors over the past year, returning just 5 per cent as Wright made a series of changes to holdings after taking over the fund.
The long-term track record is all down to Shah, with the fund therefore lagging the other choices by someway.
But the early signs of life under Wright are promising, according to Ben Willis, head of research at Whitechurch Securities.
He said the new manager is making progress in turning around its performance, bringing to bear his specialist knowledge in small caps which has seen the fund move to a bias towards the smaller end of the market.
“We are looking for a multi cap strategy, so this could work as a replacement for Julie Dean’s fund. Wright has turned around the fortunes of that fund since taking over from Shah,” Willis said.