Dominic Rowles 9 October 2017
In the first of this three-part series, I looked at how the HL Multi-Manager UK Growth Fund invests with the UK’s leading smaller companies fund managers. Below, I look at how the fund invests in the UK’s larger companies through its underlying holdings, and the approach Ellen Powley and Lee Gardhouse use in this area of the market.
The fund is run by our sister company HL Fund Managers Ltd.
The UK’s biggest businesses need no introduction. They sell products we use every day and provide services to consumers and businesses across the globe.
Many large, reputable businesses establish a brand which enables them to charge a higher price than a less well-known business. Strong brands encourage customer loyalty, meaning many will still purchase the company’s products even if the price increases. Brand loyalty can spread between generations and act as a barrier to would-be competitors. This leads to reliable cash flows, and allows these companies to increase their profits and dividends over and above the rate of inflation.
Many large companies are able to thrive for decades, or even centuries, and have access to large marketing spends, making it easier to introduce new products. They can use the trust of their existing customer base to successfully launch new products. A prime example of this is Unilever, which owns a diverse range of household brands, from Dove and Persil to Hellmann’s and Wall’s. Regular innovation and a €7.7bn annual marketing spend ensures that its products feature regularly on consumers’ shopping lists.
The UK’s biggest businesses also benefit from internationally diversified earnings streams. The advantage of this became clear last year. When the value of the pound fell against most major currencies after the EU referendum result, overseas earnings were more valuable when converted back to sterling.
Larger companies in the HL Multi-Manager UK Growth Fund
Over the last year, exposure to large companies has reduced slightly to reflect our increased conviction in managers in the UK smaller companies sector. However, larger companies still represent a significant proportion of the portfolio.The three sides of growth investing: #1. Smaller companies
Almost a third of the HL Multi-Manager UK Growth Fund is invested in UK Equity Income funds, and half of the portfolio is invested in UK All-Companies funds, giving the portfolio a core of investments in larger companies. We feel fund managers in these sectors have the ability to add significant value for investors. Our choices are a balance of experienced stock pickers and up-and-coming managers with bright futures ahead.
How has our fund performed?
Since its launch in January 2015, the HL Multi-Manager UK Growth Fund has performed well, delivering growth of 15.8%, against 9.3% for the FTSE All-Share^. We believe the results more than justify the extra costs associated with a multi-manager approach.
We think it’s in good shape to continue to outperform over the long term, although there are no guarantees, and the outperformance so far is over a relatively short time period.
Past performance is not a guide to the future
Source: Lipper IM to 30/09/2017
Fund in focus – CF Lindsell Train UK Equity
Nick Train, manager of the CF Lindsell Train UK Equity Fund seeks market-leading companies with outstanding brand loyalty. He aims to find companies which can endure for decades and invests in them for the long term. The fund currently comprises 26 companies*, including the aforementioned Unilever. We like the concentrated nature of the portfolio because it means each investment can contribute significantly to returns, although it does increase risk.
Nick Train has built an outstanding long-term track record and we think he’s one of the most talented investors in the industry.
Over the past year, the fund has grown 16.1%, versus 14.3%^ for the FTSE All-Share, though this shouldn’t be seen as a guide to future returns.
|Annual Percentage Growth|
| Sep 12 -
| Sep 13 -
| Sep 14 -
| Sep 15 -
| Sep 16 -
|HL Multi-Manager UK Growth Fund||n/a+||n/a+||n/a+||13.7||14.4|
|CF Lindsell Train UK Equity Fund||n/a+||n/a+||4.7||2.6||17.7|
Past performance is not a guide to the future
Source: ^Lipper IM to 30/09/2017 +Full-year performance figures not available prior to September 2015
*Please note the CF Lindsell Train UK Equity Fund invests in Hargreaves Lansdown plc shares.
Part three of this article looks at the HL Multi-Manager UK Growth Fund’s investments in the UK Equity Income sector. If you’d like to receive these by email you can sign up below.
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