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Newton UK Equity Fund research update

Kate Marshall | Tue 22 December 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.

In a volatile year for the UK market, many UK funds have been impacted by what sectors they've avoided, as much as what companies they own.

Mining, resources and banking stocks have suffered a torrid year and funds excluding these sectors have generally been rewarded. Newton UK Equity is one such fund. Paul Stephany, the fund's manager, has avoided some of the year's poorest performers, such as Glencore, Royal Dutch Shell, Standard Chartered and BHP Billiton. A focus on some of the better-performing areas of the market, such as the retail and consumer sectors, has proven a success.

Successful holdings this year include Domino's Pizza, Pets At Home and Booker Group, the food wholesaler. Sports Direct, a shorter-term position in the portfolio, also boosted returns. Paul Stephany introduced a position in the stock earlier in the year, but it was subsequently sold six months later following a strong run in its share price and after reaching a higher valuation.

A number of other new positions were introduced this year including Sage, the software business. According to the manager, the company is undergoing a renaissance under a new management team which aims to cut costs and improve product distribution. Drinks company Britvic was also added, which is currently focused on cost-cutting, growing its Pepsi brand in the UK, and the roll-out of Fruit Shoot drinks in the US.

Fund manager outlook

Paul Stephany currently holds a cautious outlook of the world. He expects commodity prices to remain in the doldrums, while he expects China's adjustment to a slower pace of growth will continue to have a far-reaching impact on the global economy. He therefore currently favours domestically-focused UK businesses and well-capitalised globally-exposed companies with a developed market bias. Cash-generative companies with more attractive growth prospects are preferred. The fund has the flexibility to invest in companies of all size including higher-risk smaller companies.

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Our view on this fund

Since taking over management of this fund in September 2014, Paul Stephany has delivered a return of 18.1%* against 3.1% for the FTSE All Share Index and 7.3% for the average fund in the sector. Our analysis suggests this is a result of good stock selection, as well as positioning the fund towards some of the best-performing sectors and avoiding some of the weakest. The fund manager operates a concentrated portfolio which enables each holding to make a significant impact on returns although this increases risk. Please remember his track record is short and past performance should not be seen as a guide to future returns.

Annual percentage growth
Dec 10 -
Dec 11
Dec 11 -
Dec 12
Dec 12 -
Dec 13
Dec 13 -
Dec 14
Dec 14 -
Dec 15
Newton UK Equity -6.1% 16.5% 15.0% 8.1% 12.3%
FTSE All Share 0.1% 12.6% 18.8% 4.6% 2.2%
IA UK All Companies -1.0% 13.6% 24.0% 3.4% 5.5%

Past performance is not a guide to future returns. Source: Lipper IM* to 01/12/2015.

Paul Stephany has also managed the Newton UK Opportunities Fund since February 2013 on which he has built a good track record. While his performance has been encouraging so far, his overall track record remains reasonably short. As such, the fund does not currently 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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