UK stocks that are out of favour – or, in Schroders’ fact-sheet speak, “have suffered a setback” – have been plentiful in plentiful supply so it is no wonder that recovery funds in general have done well of late.
But the funds do not come without criticism, with Tom Dobell’s M&G Recovery Fund in particular frequently cited as not really being a true recovery fund. Its top-ten holdings include BP, Prudential and Tullow Oil – each company has had its problems in the past few years but how long can a company in recovery remain in recovery without being a bad investment?
While both funds look to exploit corporate recovery situations there are distinct differences between them.
According to Juliet Schooling-Latter, research director at Chelsea Financial Services: “Tom looks to buy companies that are out of favour with the market or are undergoing change, such as new management teams coming in.
“The Schroder fund looks to buys firms trading on low cyclically adjusted P/E ratios and where market sentiment is extremely negative.”
For a deeper analysis of these two funds, with expert comment from Schooling-Latter, click here
