- The fund outperformed the broader UK stock market over the past year
- Investments in housebuilders could benefit from a government push to increase home ownership
- The fund features on the Wealth 150 list of our favourite funds in the major sectors
We feel the Standard Life UK Equity Unconstrained Fund is a more adventurous way to invest in the UK stock market.
The fund has been managed by Wesley McCoy since June 2015. He is supported by a longstanding and well-resourced team at Standard Life. They invest in companies of all sizes, including smaller companies. This is an under-researched area of the market, so it gives them the chance to spot good investments missed by others.
The team invests in a fairly small number of companies. This means each investment can make a significant contribution to the fund’s performance. But this approach, alongside investments in smaller companies, increases risk.
The fund’s performance can be volatile in the short term, but we think it will reward long-term investors. The fund currently features on the Wealth 150 list of our favourite funds in the major sectors.
The team's outlook and fund positioning
Wesley McCoy and his team think negativity towards the UK stock market has gone too far. There will always be some uncertainty in markets, but the team has a more positive outlook. The UK economy is still growing, and Britain's break from the EU might be more moderate than expected. They also think the share prices of many UK companies are too low and don't reflect their prospects.
The fund has a number of investments in UK housebuilders, including Redrow, Crest Nicholson and Bellway. The government is committed to increasing UK home ownership and this could support demand for new homes. These companies could be in a good place to benefit.
The team look out for companies that have seen their share prices drop, but remain high-quality and could turnaround.
For example, they bought shares in mobile phone retailer Dixons Carphone, aerospace and defence business Ultra Electronics, and doorstep lender Provident Financial after they released profit warnings and their share prices fell. Their analysis suggested the share price falls had been too extreme. Since then, each company’s share price has partially recovered, although it remains early days.
How has the fund performed?
The fund grew 9.6% more than the broader UK stock market over the past year*. We put this down to the team’s ability to invest in companies with bright futures ahead of them, although past performance is not a guide to the future.
|Annual percentage growth|
|Apr 2013 -
|Apr 2014 -
|Apr 2015 -
|Apr 2016 -
|Apr 2017 -
|Standard Life UK Equity Unconstrained||26.8%||8.5%||-7.5%||10.0%||17.8%|
Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2018.
An investment in private healthcare company NMC Health was one of the strongest performers. The company recently announced two acquisitions of other businesses in the Middle East. There could be more in future and the team expects this could improve earnings growth.
Bookmaker Ladbrokes Coral also performed well. The company’s share price rose when it received a takeover approach from online competitor GVC.
The manager has the ability to invest in derivatives which, if used, adds risk.