The Schroder UK Opportunities Fund is run using a business cycle approach to investing. This means stock selection is driven by the manager's belief that specific companies perform differently during each of the four stages of the business cycle - recovery, expansion, slowdown and recession.
- In fund manager Matt Hudson's view, the recovery in corporate earnings and profit margins is reaching its peak in the UK. Developed markets, including the UK, have also been impacted by the slowdown across China and the emerging markets.
- As such, he believes we are moving from the expansionary phase of the business cycle towards a slowdown. He has therefore been tilting the fund towards more defensive areas of the market, focusing on companies with strengthened balance sheets that he believes can weather periods of volatility. Positions in companies such as Reckitt Benckiser and Smith & Nephew have recently been topped up.
- Conversely, the manager has reduced exposure to a number of economically-sensitive companies, including Melrose Industries and Premier Farnell.
Since Matt Hudson took over management of the fund in September 2014, the fund has fallen 0.98%*, marginally underperforming the 0.63% loss delivered by the FTSE All Share index, although past performance should not be seen as a guide to future returns and this is over a short period. While our analysis suggests the fund's sector positioning and medium-sized company bias should have provided a tailwind, stock selection has detracted from returns. Investors should note the fund is a concentrated portfolio, which enables each holding to make a significant impact on returns however this is a higher-risk approach.
|Annual percentage growth|
| Nov 10 -
| Nov 11 -
| Nov 12 -
| Nov 13 -
| Nov 14 -
|Schroder UK Opportunities||4.0%||30.6%||40.7%||-9.0%||2.3%|
Past performance is not a guide to future returns. Source: Lipper IM* to 02/11/2015
Our view on this fund
Matt Hudson has a longer track record in managing a UK equity income portfolio, on which he has delivered attractive returns over the long term. That said, we feel the manager is relatively untested in running a UK growth portfolio and this fund will behave differently than previous ventures. We would prefer to monitor his performance over a prolonged period before considering the fund for inclusion on the Wealth 150 list of favourite funds across the major sectors.