In recent weeks the FTSE 100 has hovered around its all-time high, just over 7,000 points. David Docherty, manager of the Schroder Core UK Equity Fund, is positive on the outlook for growth in the UK, as well as the prospect for rising company earnings and dividends. He therefore believes share prices could rise further.
Over the past year he has retained a preference for companies which have tended to perform better when the economy is stronger. This includes mining and commodity companies, particularly those where he believes share prices don't fully reflect the value of a company's assets. He also suggests many are making strides towards improving returns for shareholders, having cut excess costs, for example. Rio Tinto and Glencore are two core investments for the fund in this sector.
In contrast, David Docherty is less positive on companies which have tended to have more reliable earnings and therefore performed better during more challenging economic times. After a strong period of performance for such companies he feels share prices have risen too high and can't be justified based on the current outlook for earnings growth. For this reason he has maintained less exposure to companies such as Unilever and Reckitt Benckiser in the consumer goods sector.
Over the past year the overall positioning of the portfolio has not paid off. Investors have, on the whole, continued to appreciate the steady earnings and dividends of less economically sensitive companies. On the other hand, commodities and resources companies have struggled against a backdrop of falling demand in commodity-intensive countries such as China, and falling commodity prices generally.
Over the past year the fund has fallen by 0.1%* compared with a rise of 7.7% for the average fund in the IA UK All Companies Sector and 7.4% for the FTSE All Share Index, with dividends reinvested. Please remember past performance is not a guide to the future.
Schroder Core UK Equity Fund performance over the past year
Past performance is not a guide to the future. Source: Lipper IM* to 01.05.2015
|Annual percentage growth|
| May 10 -
| May 11 -
| May 12 -
| May 13 -
| May 14 -
|Schroder Core UK Equity||14.6%||-5.4%||18.9%||12.7%||-0.1%|
|IA UK All Companies||15.6%||-2.6%||18.4%||13.8%||7.7%|
|FTSE All Share||16.8%||-1.0%||16.9%||10.5%||7.4%|
Our view on this fund
2014 was a difficult year for the fund, particularly relative to the FTSE All Share Index. Since taking over in January 2009 David Docherty has underperformed this benchmark and overall we do not believe his track record is strong enough to merit a place on the Wealth 150 list of our favourite funds across the major sectors.