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Franklin UK Opportunities Fund research update

Kate Marshall | Mon 23 March 2015

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.

Ben Russon, manager of the Franklin UK Opportunities Fund, believes we remain in a 'lower for longer' environment; be that interest rates, economic growth or stock market returns.

Given his relatively conservative outlook, the core of this fund is composed of high-quality companies, with strong balance sheets and business models that are not dependent on the economic cycle. In his view, these holdings should provide some resilience to the capital invested in the portfolio during periods of market volatility. This core is augmented by a number of companies with less defensive qualities, but which the manager believes offer the potential for substantial capital appreciation.

On a sector basis the fund is biased towards areas such as tobacco and pharmaceuticals - the manager views these as cash-generative industries with limited exposure to the economic cycle. British American Tobacco, GlaxoSmithKline and Imperial Tobacco currently form some of the fund's largest holdings.

Within the portion of the portfolio focused on more economically-sensitive areas with greater growth prospects, Ben Russon currently favours the retail, media and travel & leisure sectors. The fund's greatest positive contributors to performance over the past year have come from a number of companies residing in these sectors, including Dixons Carphone, media company Reed Elsevier, and retailer Next.

On the other hand, the fund currently has limited exposure to the banking and mining sectors, where Ben Russon sees fewer opportunities and greater downside risk. In his view, the banking sector is heavily reliant on the direction of the economic cycle, and is also currently hampered by increasing regulation. He has also tended to avoid mining companies amid weakened commodity prices pressured by excess supply. During a difficult year for these sectors, this positioning has helped boost performance.

The fund provides exposure to both large and higher-risk medium-sized companies, though exposure to the latter was reduced in the early part of 2014. At this time, the manager felt greater value could be found in the larger end of the market - this change in positioning paid off over the course of the year as smaller firms tended to underperform their larger counterparts.

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Our view on this fund

Ben Russon took over the Franklin UK Opportunities Fund in June 2013, since which point it has outperformed the FTSE All Share Index* and the sector average. Please note this is over a short timeframe and is no guide to how the fund will perform in future. The manager previously established a good track record at Newton where he managed the Newton UK Opportunities Fund, although this fund was an expression of the entire UK equity team's best ideas. The Franklin UK Opportunities Fund will behave differently than his previous venture.

Annual percentage growth
Mar 10 -
Mar 11
Mar 11 -
Mar 12
Mar 12 -
Mar 13
Mar 13 -
Mar 14
Mar 14 -
Mar 15
Franklin UK Opportunities 14.9% 0.5% 10.6% 13.3% 11.2%
IA UK All Companies 18.5% 0.8% 13.9% 17.7% 5.4%
FTSE All Share 14.8% 3.4% 13.3% 11.2% 7.2%

Past performance is not a guide to future returns. Source: Lipper IM* to 02/03/2015

At Franklin Templeton, Ben Russon works closely with the group's UK team who we hold in high regard. He also has the support of Mark Hall, the fund’s previous manager, who continues to focus on providing research and analysis. While we have no concerns with this fund, we would prefer to monitor it for a prolonged period before considering it for inclusion 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.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
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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