To price on Wednesday (18 December), UK Alpha Fund (IRL) is a sub-fund of Old Mutual Global Investors plc Sicav, and has been launched in response from increased demand from an international client base.
As per the onshore strategy, the new vehicle’s objective will be to maximise long-term capital growth through a concentrated portfolio of 35-40 predominantly large cap UK equities, with no benchmark or tracking error constraints.
The launch marks Buxton and colleague Errol Francis’ six-month anniversary at OMGI, having joined from running £4.8bn at Schroders.
Since joining, Buxton has been upping his weighting to financials. The portfolio currently has around 30% in this sector; the manager impressed by Bank of England governor Mark Carney’s positive pronouncements on the City and the belief that an environment of long-term gently rising bond yields will be positive for the sector.
Alongside long-standing positions in Lloyds and Barclays, Buxton has built up a position in HSBC, which is currently his top holding at around 4.5%.
He explained: “HSBC was always seen as the default bank that investors held when they didn’t want to hold banks because it is so strong in terms of its capital. We think there is now a story developing that it is feeling incredibly confident about its two core markets – the UK and Hong Kong – and actually wants to put some of its excess deposits to work in loan growth.”
The fund is also heavily invested in life insurers, Legal & General and Resolution. Buxton also bought St James’s Place in Q1 2013 as part of the first Lloyds placing, and has bought a 3% position in Aviva since joining OMGI.
He added: “Clearly a new management team has come in [at Aviva] and is addressing the issues that the company has had for many years. The disposal of its US business and the cutting of the dividend to shore up the balance sheet were deeply sensible and absolutely necessary.
“The focus is now on simplifying the business, cutting costs and freeing up some of the cashflow being generated in overseas subsidiaries, to get it back up to the holding company and therefore grow the dividend from the reduced position.”
A full interview with Richard Buxton will feature in the forthcoming January edition of Portfolio Adviser, out soon.