Tim Steer, manager of the Artemis UK Growth Fund, is generally positive in his outlook for the UK economy. While he expects economic growth could moderate this year, lower energy and food prices could be good news for UK consumption.
Given his outlook, the manager has continued to shift the portfolio towards domestically-focused UK businesses such as retailers - a process he began around three years ago. His focus lies on highly cash-generative businesses; particularly those he believes will use this cash to increase dividend payments, take part in share buybacks or pay special dividends. The fund has already benefited from a number of companies paying unexpected special dividends, including ITV and easyJet.
Card Factory, the chain of greeting card shops, is another example of a current holding generating good levels of cash, according to Tim Steer. He believes the business could start rewarding shareholders by initiating dividend payments, while it also has the potential to expand by rolling out further stores across the UK.
Companies with significant exposure to the US have recently boosted performance. The fund's largest position in Ashtead Group, a construction rental equipment company with a presence in the US, has performed exceptionally well. The company has benefited from the strength of the US construction market and has continued to increase market share. Tim Steer also expects Elementis, which manufactures specialty chemicals used in industrial products, to benefit from its exposure to the same market. The portfolio is currently relatively concentrated which allows each holding to have a significant impact on performance although this is a higher risk approach.
The fund also holds around 7% in 'short' positions (the permitted maximum is 10%), with the manager aiming to profit from shares falling in value. He has a good track record in this area, although it relies on him making the right calls and if he gets it wrong and the share price rises the fund will lose money. The fund can also invest in smaller companies which can be more volatile than their larger counterparts.
Our view on this fund
Tim Steer has a good record of outperforming the broader UK stock market over the long term, though his performance has been volatile at times. Since taking over the portfolio in July 2009, he has delivered an overall return of 117.9%, against 98.7% for the sector average and 91.5% for the FTSE All Share index, though please remember past performance is not a guide to future returns.
|Annual percentage growth|
| Jan 10 -
| Jan 11 -
| Jan 12 -
| Jan 13 -
| Jan 14 -
|Artemis UK Growth||26.8%||-3.8%||12.6%||33.8%||-0.5%|
|IA UK All Companies||18.0%||-7.1%||15.6%||23.9%||0.6%|
|FTSE All Share||14.7%||-3.02%||12.1%||17.8%||1.3%|
Past performance is not a guide to future returns. Source: Lipper IM* to 02/01/2015.
The manager previously ran a UK fund at New Star (now Henderson), which also outperformed his peers and the index over his tenure, although it suffered a particularly difficult period during the financial crisis.
We view Tim Steer as a good-quality manager and we would expect him to deliver good returns over the long term. However, this is a very competitive sector and we currently favour other managers investing in this space. We will continue to monitor the fund closely before considering it for inclusion in the Wealth 150 list of our favourite funds across the major sectors.