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Schroder UK Alpha Plus - seeking good value, quality UK businesses

Kate Marshall | Tue 28 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 Matthews seeks undervalued, quality companies that are often out-of-favour with investors
  • He has aimed to reduce the fund's volatility and deliver greater consistency of returns
  • Investments in the banking sector have been increased, but have held back shorter-term returns

Against a backdrop of weak global economic growth, many investors have favoured the perceived safety of companies producing resilient earnings, such as those in the consumer goods sector. While these companies have typically provided some resilience during periods of uncertainty, their recent popularity and good performance means valuations have become less attractive.

Philip Matthews, manager of the Schroder UK Alpha Plus Fund, has reduced exposure to these areas of the market, favouring those offering greater value. He is currently focused on some of the more economically-sensitive sectors, such as banks, construction and media, and out-of-favour companies undergoing improvement.

The manager increased the fund's exposure to the banking sector over the past year, adding significantly to an investment in Lloyds, as well as initiating a new investment in Standard Chartered. The shares of companies exposed to emerging markets, such as Standard Chartered, have typically performed poorly in recent years. However, Philip Matthews believes investors underestimate the longer-term growth potential of the bank's exposure to the developing world, where populations and the middle classes are growing.

Elsewhere, the manager added to the pharmaceuticals sector by initiating new investments in higher-risk smaller companies Clinigen, Indivior and Skyepharma. He also sold a number of investments that have performed well and whose valuations look less attractive, including house builder Taylor Wimpey, wealth manager St James's Place, and London Stock Exchange .

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Performance

Over a volatile year for the UK stock market, the fund fell 6.1%* compared with 6.6% for the FTSE All Share Index, although please remember past performance is not a guide to future returns. A lack of exposure to the consumer goods sector held back returns, as did the fund's banking exposure, including investments in Royal Bank of Scotland and Barclays. On the other hand, investments in a number of software and computer services businesses, including Sage Group, Fidessa and Computacenter, contributed positively to performance.

Annual percentage growth
June 11 -
June 12
June 12 -
June 13
June 13 -
June 14
June 14 -
June 15
June 15 -
June 16
Schroder UK Alpha Plus -11.3% 42.7% 12.8% 6.5% -6.1%
FTSE All-Share -8.5% 30.6% 10.2% 6.8% -6.6%

Past performance is not a guide to future returns.

Source: Lipper IM to *01/06/2016.

Philip Matthews assumed responsibility for the fund in October 2013 and over this time the fund has grown by 7.4%* compared with 6.6% for the FTSE All Share Index.

Please note the fund is a relatively concentrated portfolio, which enables each holding to make a significant impact on returns, although this is a higher-risk approach.

Our view on this fund

Since taking over its management, Philip Matthews has positioned this fund with the aim of reducing volatility and providing greater consistency in performance across different market conditions. He has been successful to a degree as the fund's performance has not deviated significantly from the broader UK market.

Over the longer term and at previous ventures, the manager has demonstrated an ability to outperform the FTSE All Share Index to a greater extent. At Schroders, our analysis suggests the manager’s stock picking has struggled to add value. While this is over a relatively short timeframe, we would prefer to see evidence of an ability to deliver greater levels of consistent outperformance over a prolonged period. 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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