LF Majedie UK Equity: December 2021 fund update

• This fund's unique structure combines the best ideas of four fund managers, whose strengths and styles are carefully blended together
• We like the fund's flexible approach, which means the managers are free to invest wherever they see the best opportunities
• They have a good long-term track record, with particularly strong stock picking skills amongst larger companies
• This fund is on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits into a portfolio

The best ideas of an experienced team, combined with their willingness to invest differently from the herd, makes the LF Majedie UK Equity fund stand out from other UK growth funds. We think it's a good all-rounder for the UK part of a portfolio. It could sit well alongside other funds that invest more overseas.

Manager

The fund is managed by a team of four managers, each with their own strengths, styles and areas of focus.

James De Uphaugh and Chris Field have been analysing and investing in UK companies for more than three decades. They were both founding members of Majedie Asset Management and have served as co-managers on the fund since launch in 2003. Imran Sattar joined the team in 2018 and has more than two decades' experience in UK equities. The trio are each responsible for 30% of the fund and focus primarily on large and medium-sized businesses.

John King joined Majedie in 2019. He previously worked as a fund manager at AXA alongside well-regarded fund manager Chris St John. King is responsible for 10% of the fund and focuses on higher-risk smaller companies.

We're mindful there have been a number of team changes in recent years but encouraged that longstanding fund managers James De Uphaugh and Chris Field remain central to the strategy and are dedicated to Majedie.

Process

The team at Majedie uses a flexible investment process on this fund. Each manager is given the freedom to invest according to their own strengths and styles, which are carefully blended together. This means the fund combines more established companies that have consistently grown profits, with those that have been through a difficult time but have the potential to recover.

The managers don’t focus on any particular sectors. They prefer to adopt a whole-of-market approach as this reduces the risk that they have blinkered views in favour of their own sectors. The managers also spend time thinking carefully about how economic changes can impact the companies they invest in, and this is built into their analysis.

The team draws on a broad range of tools when coming up with investment ideas, including in-house systems and technical models perfected through decades of experience. Key to their investment process is regular meetings with company management teams. The meetings allow the team to probe management and glean insights that aren't available through the report and accounts.

The managers believe the UK is emerging from the Covid-19 pandemic, helped by innovations like the vaccine, and a new antiviral pill that significantly reduces hospitalisations caused by the virus. They therefore added to investments set to benefit, including Compass, a company that provides food and beverage services for sports events, concerts, and companies. They also added to hotel and restaurant operator Whitbread and airline easyJet.

Elsewhere, the managers made a new investment in Ascential, a company that uses big data to help other companies optimise their digital commerce, product design and marketing strategies, in return for a subscription-based fee. They think the company will benefit from growth in digital commerce, and its increasing scale could make it more difficult for other companies to compete.

In contrast, Primark owner Associated British Foods was sold. The managers think the company is coming up against an increasing number of headwinds, including a call for greater sustainability. Primark also doesn’t have an online shop, with products only available in-store. This puts it at a disadvantage to many competitors.

Please note the fund invests in Hargreaves Lansdown plc.

Culture

We like the fact the managers are focused on company analysis and fund management. Administrative, compliance, and marketing tasks are carried out by other teams at Majedie, and we think this support is a bonus.

Fund managers are incentivised in a way we think aligns their interests with those of clients and encourages them to remain with the company for the long term. They also invest a significant amount of their money in their own funds. That said, there have been some departures from the team in recent years, so we continue to monitor this closely.

Another key part of the Majedie culture is 'responsible capitalism'. The team uses their right to vote at company Annual General Meetings (AGMs) and actively engages with the companies they invest in to push them to be the best they can be across every aspect of their business. They also consider the Environmental, Social and Governance (ESG) risks and opportunities of each company they invest in.

It was recently announced that Majedie Asset Management will be acquired by Liontrust Asset Management. The deal is expected to complete on 1 April 2022, at which point all members of Majedie’s investment team and the majority of other colleagues from across the business will join Liontrust. The investment philosophies and processes that underpin the Majedie range of funds, including the Majedie UK Equity fund, will not change.

Acquisitions and other corporate changes can unsettle investment teams, creating the potential for fund manager or product changes. We'll continue to monitor the situation and keep investors informed of any further developments, or if our views change.

LIONTRUST TO ACQUIRE MAJEDIE: READ OUR FULL FUND NOTIFICATION HERE

Cost

This fund has an ongoing annual charge of 0.65%, but a discount of 0.10% is available for HL investors, which reduces the charge to 0.55%. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.45% per year also applies.

Performance

The managers have a good long-term track record and have outperformed the broader UK stock market over the long run. The fund's tended not to fall as far when markets are weak and perform broadly in line with the UK market when it's rising. Our analysis suggests that the managers' stock picking has been particularly strong within the financials, technology and industrials sectors. You should remember that past performance is not a guide to the future. Like all investments, the fund can fall as well as rise in value so investors could get back less than they invest.

Over the past year, the fund performed broadly in line with the UK stock market. Top performers included industrial and construction equipment rental business Ashtead Group. The company recently announced that revenues and profits would be higher than expected, boosted by strong performance from its US, UK and Canadian operations. Bakery chain Greggs was another strong performer.

Weaker performers included gold mining company Barrick Gold. It was held back by gold prices, which were weak for much of the period.

Past performance isn't a guide to the future. Source: Lipper IM 30/11/2021.

Find out more about LF Majedie UK Equity, including charges

LF Majedie UK Equity Key Investor Information