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Investec UK Alpha Fund research update

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.

We are set to remain in a world of low economic growth for some time yet, according to Simon Brazier, manager of the Investec UK Alpha Fund. Governments across the globe are contending with unprecedented levels of debt, while quantitative easing, which was originally initiated as a short-term measure to stimulate economic growth, has since become the lifeblood of global monetary policy.

In the UK, however, the manager is relatively optimistic in his outlook for the economy: economic growth is reasonable; consumer confidence is rising; and unemployment has been falling. He also expects inflation to pick up by the end of the year as the impact of the falling oil price peters out.

Despite the economic travails we have faced in recent years, the UK stock market has performed remarkably well since the 2008/09 financial crisis. As such, valuations now appear fuller than they once were and Simon Brazier suggests only three sectors are trading on valuations below their 10-year average - financials, materials, and energy.

The manager is sensitive to valuation when it comes to constructing the portfolio, so he has recently been taking a closer look at the three aforementioned sectors. While the fund currently has less exposure to these sectors compared with the wider market, he has recently increased exposure. Within banking, Lloyds and Royal Bank of Scotland have been added to the portfolio, which the manager expects to benefit from an improving regulatory and political framework.

Elsewhere, in the mining sector Simon Brazier has focused on companies he believes will perform well as a result of self-help initiatives and a strong management team, rather than relying solely on commodity prices. Holdings include Rio Tinto and First Quantum.

Overall Simon Brazier seeks businesses he believes can thrive even in a low-growth world. This includes companies with strong brands, high barriers to entry and high-quality management, such as GlaxoSmithKline and Unilever. He also invests in restructuring and recovery stories, which tend to be companies encountering short-term difficulties that have undergone a change of management or implemented a new strategy in an attempt to turn around their fortunes. Examples here include BP, G4S and Vodafone.

Simon Brazier invests flexibly across larger companies as well as higher-risk small and medium-sized businesses. Presently around 70% of the fund is invested in larger firms, as this is where the manager is finding the greatest value, along with 24% and 3% in medium-sized and smaller companies, respectively.

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Our view on this fund

Simon Brazier took over management of the Investec UK Alpha Fund in January this year. Over this time the fund has outperformed the FTSE All Share index, although it has marginally underperformed the sector average*. Please remember past performance is not a guide to the future and this is over a short timeframe.

Annual percentage growth
Aug 10 -
Aug 11
Aug 11 -
Aug 12
Aug 12 -
Aug 13
Aug 13 -
Aug 14
Aug 14 -
Aug 15
IA UK All Companies 14.8% -2.2% 28.3% 4.2% 10.3%
FTSE All-Share 11.3% 2.4% 23.9% 3.8% 6.1%
Investec UK Alpha 10.5% -2.0% 40.5% 11.4% 11.9%

Past performance is not a guide to future returns. Source Lipper IM* to 01/08/2015.

Prior to joining Investec, the manager ran a number of UK portfolios at Threadneedle, including the Threadneedle UK Fund for just over four years. Previous to this, Simon Brazier was at Schroders for 12 years, where he managed a variety of UK funds.

Over the past five years, our analysis suggests Simon Brazier’s performance has primarily been driven by good stock selection. That said, over the longer term we view his track record as good, but not exceptional. We currently favour other managers in this sector; 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.

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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