Save, make, understand money

Getting Started

Lloyds shares: three funds to get exposure

Joanna Faith
Written By:
Joanna Faith

The UK government will be pressing ahead with an offer of £2bn of shares in Lloyds Banking Group next spring.

However, for investors wanting to get exposure to Lloyds and other UK retail banks, six months might be a long time to wait.

The Lloyds share offer is an important step in returning the UK Banking sector to full private ownership and an opportunity for investors to access the shares at a discount. However not everyone wants to buy individual shares and this is where funds can help.  By investing in a manager who has done all the research and analysis investors are able to benefit from that expertise, access the UK banking sector and get a well-diversified portfolio.

AXA Wealth has identified three funds through which investors could access Lloyds and other UK bank shares:

Investec Special Situations: The fund currently has 4.31% in Lloyds Banking Group and 19.46% in Banks.  A true contrarian, Alastair Mundy looks for companies whose share price has fallen substantially from their peak.  Mundy is effectively a bargain hunter and buys companies which are undervalued compared to his analysis. To avoid value traps he looks for companies which have strong balance sheets and are in good financial health. While a simplistic approach execution requires a lot of skill and experience which Mundy has. His approach means he invests in areas of the markets others avoid providing investors with diversification and the potential to outperform in rising markets. The fund currently yields 2.7%.

Schroder UK Alpha Income: Manager Matt Hudson holds 11% in UK Banks, with 3.82% in Lloyds. He follows the market cycle to identify which companies will do well in and make adjustments accordingly. In addition to economic analysis he researches companies looking for potential dividend increases or rises in earnings growth.  The fund has an dividend yield of 4%

Artemis Income:  Has 3.54% in Lloyds and 9.34% in Banks. Managers Adrian Frost and Adrian Gosden are pragmatic managers who look to invest in companies which are increasing their earnings.  They focus on businesses with sustainable cash flows and attractive valuations. The duo have exceptional stock picking skills with an emphasis on cash generation. They can invest across the entire UK Stock market but with a focus on larger and medium-sized companies.

Adrian Lowcock is head of investing at AXA Wealth