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Artemis UK Special Situations - a brief update

Kate Marshall | Mon 08 February 2016

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Over the past year the UK stock market has been characterised by high levels of volatility. Concerns over slowing growth in China and falling commodity prices has unnerved investors leading to severe market swings, particularly in the FTSE 100 Index of the UK's largest companies.

Derek Stuart, manager of the Artemis UK Special Situations Fund since March 2000, doesn't believe he has seen such extreme moves in the FTSE 100 throughout his fund management career. In his view investors have reacted too sharply and quickly to wider economic news, rather than focusing on the long-term prospects for individual companies. In this type of uncertain environment, he suggests investors seeking long-term returns should hold their nerve and ride out periods of volatility.

Last calendar year the fund delivered a return of 3.7%*, outperforming the FTSE All Share index by 4.7%, although this is not a guide to how the fund will perform in future. A small weighting in the poor-performing oil and mining sectors proved beneficial. The fund also outperformed the IA UK All Companies sector but to a lesser degree, given many of the fund's peers also expressed caution and avoided oil and mining companies.

Annual percentage growth
Feb 11 -
Feb 12
Feb 12 -
Feb 13
Feb 13 -
Feb 14
Feb 14 -
Feb 15
Feb 15 -
Feb 16
Artemis UK Special Situations -4.9% 19.5% 20.4% -1.0% 1.9%
FTSE All-Share 0.1% 15.4% 8.0% 8.3% -5.4%
IA UK All Companies -2.4% 16.3% 16.3% 4.8% -1.6%

Past performance is not a guide to future returns. Source: Lipper IM* to 01/02/2016.

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Software company Micro Focus, currently the fund's largest holding, had a strong year, particularly towards the end of 2015 after producing a strong set of results and upgrading its forecasts for 2016. The manager has since taken profits and reduced the position slightly.

On the other hand a position in Home Retail, the parent company of Argos and Habitat, performed poorly. The last few months of the year were most painful after the company issued a profit warning. Derek Stuart maintained his holding, however, and the stock has fared better so far this year. Argos remains the second most-visited online retailer in the UK, while the manager feels a takeover by Sainsburys could prove positive for the company.

Our view on this fund

Derek Stuart has a good long-term track record managing UK equities. He was joined by co-manager Andy Gray in January 2014 and also has the support of Artemis' wider team of analysts.

The fund performed exceptionally well over its first four years, when it was much smaller and had greater exposure to smaller companies. While the fund has outperformed its benchmark and the sector average over the past eleven years, performance has been more subdued. As always, past performance is not a guide to future returns.

While we rate Derek Stuart as a quality fund manager, we believe the fund's size is likely to restrict his ability to exploit opportunities in higher-risk small and medium-sized companies. Consequently we believe he is less likely to be able to deliver the levels of strong performance seen in the past. Presently, this fund does not feature on the Wealth 150 list of our favourite funds across the major sectors.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

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.


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