- Run by an experienced manager, backed by one of the best teams in the industry
- Long-term performance has been strong
- The fund isn’t on our Wealth 150 because it’s closed to new investors
We’ve held the Old Mutual UK equity team in high regard for a long time. Luke Kerr blends the team’s best ideas together to form the Old Mutual UK Dynamic Equity Fund.
He’s got flexibility to invest in companies of any size but he tends to focus on small and medium-sized businesses. They normally get less attention from other investors, which means there are plenty of overlooked opportunities to choose from. They’re higher-risk than larger businesses though.
The manager invests in a small selection of companies and can also benefit from falling share prices by using derivatives to take ‘short’ positions. This also increases risk.
Luke Kerr does something different to a lot of other managers in the UK All Companies sector. It means his fund’s performance will be different sometimes, but we think it could boost returns over the long-term.
The fund closed to new investors in May 2017. This stops it growing too big, which could compromise the manager’s investment approach and affect performance. That’s why it’s not on the Wealth 150 list of our favourite funds in the major sectors.
How has the fund performed?
Performance has been strong over the long term. An investment of £10,000 made at launch in July 2009 would be worth £52,666*. The broader market of medium-sized UK businesses would have returned £36,767, while the fund’s peers in the UK All Companies sector returned £27,381.
We put this down to the manager’s ability to select companies with outstanding prospects, although this isn’t guaranteed to continue.
Old Mutual UK Dynamic Equity: value of £10,000 invested at launch
Past performance is not a guide to the future. *Source: Lipper IM to 31/07/2018.
Recent performance was held back by some company-specific issues. Retailers Superdry and Footasylum performed poorly after they released results that fell below investors’ expectations. Footasylum was later sold from the portfolio.
But there were lots of success stories too. Drinks manufacturer Fevertree performed well, and so did process automation business Blue Prism. A ‘short’ position in estate agent Countrywide also did well as the company warned investors that profits would be below expected levels and the share price fell sharply.
|Annual percentage growth|
|July 2013 -
|July 2014 -
|July 2015 -
|July 2016 -
|July 2017 -
|Old Mutual UK Dynamic Equity||8.1%||24.3%||6.2%||39.1%||7.7%|
|FTSE 250 (excluding investment trusts)||7.1%||17.9%||-0.8%||17.2%||8.4%|
|IA UK All Companies||6.5%||8.5%||1.2%||16.6%||8.6%|
Past performance is not a guide to the future. Source: Lipper IM to 31/07/2018.
With Brexit looming and no certainty if we’ll get a deal with the EU, people are nervous. Luke Kerr thinks this might make consumers delay making big purchases, which could cause UK economic growth to slow. He thinks the outlook for some other global economies is brighter.
That’s why he’s invested less in companies sensitive to the health of the UK economy and focused on those that could benefit from the growth of overseas economies. Online clothing retailer Boohoo is an example. It’s listed on the UK stock market but makes money in almost every country in the world. It has a particularly strong presence in the US, Europe and Australia, as well as the UK.
Please note the Old Mutual UK Dynamic Equity Fund is domiciled overseas. That means you’re not normally entitled to compensation through the UK Financial Services Compensation Scheme.