Ninety One has merged a pair of Alastair Mundy’s former funds after both saw assets shrivel during the pandemic.
An announcement posted to the fund group’s website confirmed it had combined the Ninety One UK Total Return fund with the UK Special Situations fund at the end of February.
Explaining its decision Ninety One said UK Total Return’s size “has declined significantly to the point that it is no longer economically viable and is not expected to grow.”
Data from Morningstar shows the fund lost over 80% of its assets in 2020, falling from £160m in January 2020 to £28m a year on. Over the last 12 months it has lost 15.5% compared with the peer average which was up 3.9%.
Mundy’s UK Special Situations sheds two thirds of its assets in 2020
UK Special Situations has also rapidly declined in size over the past year, seeing two thirds of its value shaved amid the volatility from the Covid pandemic. At the end of January 2021 it stood at just £349m, a shadow of its former £1bn size at the start of 2020.
The value style fund did considerably worse than peers over 2020, racking up losses of 15% versus the IA UK All Companies average of -6%. Holdings in Rolls-Royce, Jet2 and Easyjet all detracted from the fund’s returns as the travel sector was severely hit by the pandemic, with Rolls-Royce’s balance sheet posing a particular cause for concern.
Former manager Mundy took a leave of absence due to poor health last April, before announcing his exit from the industry to become a teacher. His UK Total Return and UK Special Situations funds were taken over by Alessandro Dicorrado and Steve Woolley, who will remain managers of the merged fund.
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Newly merged fund is well positioned for any ‘above-expectation rise in inflation’
In a statement given to Portfolio Adviser about the decision to merge the two funds co-manager Dicorrado said: “Value investment has underperformed more growth-oriented approaches in recent years, with the past year no exception due to headwinds brought about by the Covid-19 pandemic, combined with pressure on domestic UK companies due to Brexit.
“However, positive Covid-19 vaccine news in November signalled the start of a turnaround,” he continued. “Over 12 months to 8 March 2021, the Ninety One UK Special Situations Fund has returned 17.23% compared to its benchmark (FTSE All Share Total Return index) which returned 8.93% and an IA UK All Companies sector return of 12.08% over the same period.
“While uncertainty remains, we continue to find companies we believe to be good quality and often with strong balance sheets, but that are trading at a discount. We continue to diversify across several value-related themes and remain positive on the outlook. We believe that value stocks are currently cheap, uncorrelated with other equity factors and positively correlated to bond yields. We are excited about the value investment opportunity and think the fund is well positioned to benefit from a cyclical upturn, and from any above-expectation rise in inflation,” Dicorrado added.
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In its first value assessment last year, Ninety One revealed that 30% of its funds offer poor value for money. A number of its struggling funds were value-focused equity funds, including UK Special Situations and UK Total Return.
