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River & Mercantile UK Dynamic Equity - a truly flexible and active UK fund

Kate Marshall | Wed 15 June 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.
  • Philip Rodrigs assumed responsibility for the fund at the start of this year
  • Investments in consumer companies have increased, while exposure to the financials sector has reduced significantly
  • The fund continues to invest flexibly across small, medium-sized and larger UK firms

The River & Mercantile UK Dynamic Equity Fund re-launched earlier this year with newly-appointed manager Philip Rodrigs at the helm. The manager has the flexibility to invest across small, medium-sized, and larger companies - with a long track record investing in smaller businesses, he uses his experience to spot opportunities early and hold onto them as they grow into tomorrow's biggest success stories. Smaller companies are, however, higher risk than their larger counterparts.

The fund has outperformed both the broader UK market and the IA UK All Companies sector so far under Philip Rodrigs' management. However, please note this is over a very short timeframe and past performance is not a guide to how the fund will perform in future. We recently spoke to the manager to find out more about the fund's performance and its positioning.

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Portfolio update

Philip Rodrigs significantly reduced the fund's exposure to the financials sector (currently 6%), which proved beneficial to performance. Companies in the sector, particularly high street banks, could suffer from low interest rates and increasing regulation, in the manager's view. Investments in Barclays and HSBC have been sold, although Lloyds remains in the portfolio on account of its cost-cutting initiatives, low valuation and potentially attractive dividend.

The manager is positive in his outlook for the UK consumer and increased exposure to consumer-related sectors, such as retail and travel and leisure. Merlin Entertainments, which operates theme parks worldwide, was recently added to the fund. The theme park operator is seeing growing demand for its content-based parks, such as Legoland. Using new and efficient ticketing software could also improve cash flows, which could subsequently be used to rollout more leisure parks.

While the fund remains biased to small and medium-sized companies, exposure to larger firms, as well cash, increased earlier this year, which provided some shelter amid market volatility. As we approach the EU referendum, Philip Rodrigs has been tilting the fund back to some of the more domestically-exposed medium-sized companies, which he feels will benefit should the UK remain in the EU.

Fund (%) FTSE All Share (%) Active weight (%)
FTSE 100 62.9 80.1 -17.2
FTSE 250 22.8 16.3 6.5
FTSE Small Cap 4.9 3.5 1.3
AIM 4.7 0 4.7
Other 0.5 0 0.5
Cash 4.2 0 4.2

Source: River & Mercantile, correct at 30/04/2016

Please note the fund has the ability to use derivatives which, if used, adds risk.

Our view on this fund

Philip Rodrigs has got off to a good start in managing this fund, in our view. He has the willingness to back his ideas with high conviction – this means the fund tends to be positioned quite differently to its benchmark and invests in a relatively concentrated number of shares. This is an approach we favour as we feel it offers greater opportunity for outperformance, although it is a higher-risk strategy.

Philip Rodrigs has a track record spanning a decade and over this time our analysis suggests he has added value through stock selection in companies of all sizes. The manager also has the support of a well-resourced and experienced UK team at River & Mercantile, where we feel he is well-incentivised to perform for investors over the long term. The fund features on the Wealth 150+ list of our favourite funds at the lowest ongoing fund charge. Please note the charge to hold investments in the Vantage Service is up to 0.45% p.a.

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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