Manager Alexandra Jackson is returning to her roots and shifting the focus of the newly coined Rathbones UK Opportunities fund away from recovery and toward growth companies in her preferred “hunting ground” – the small to mid-cap space.
Before becoming the manager of the Rathbones Recovery fund in 2014 alongside Jo Rands, Jackson worked on the firm’s Global Opportunities fund for six years.
The change in strategy means “we don’t have to look for the blip anymore,” said Jackson. “We can look for out and out great growth companies.”
The rebranded Rathbones UK Opportunities fund will still have the same benchmark, the FTSE All-Share, and track record.
Jackson will remain the sole manager of the fund but she is in the process of recruiting an analyst to help advise on the strategy.
The choice to nix the “recovery” label came about because Jackson’s strategy didn’t fit the mould of products within the space
“We found the name was really confusing clients and it wasn’t exactly clear what we were doing,” explained Jackson.
“We don’t do what M&G do, we’re not refinancing balance sheets, and we’re not the typical value investors like Schroders’ recovery fund.”
Expect some changes
Despite the pivot in strategy, the portfolio’s universe of stocks will remain broadly similar, according to Jackson. The fund will be able to hold between 40 and 50 stocks, as it did previously, and will maintain its mid-cap bias.
“There will be loads of overlap,” she said. “Some of the names in the recovery fund have recovered so much that they have become great growth names.”
However, Jackson does intend to cut five or six “real recovery names,” which no longer fit the mandate.
Jackson’s fund only has 20% invested in FTSE 100 companies, compared with the FTSE All-Share benchmark, which has an 80% weighting. And where valuations are currently, “20% feels right”, she said.
The bigger names in her portfolio, include Royal Dutch Shell, mining company BHP Billiton, insurer Aviva and struggling advertiser WPP. The performance of the latter this year is one that “definitely really weighs on me,” she admitted, but noted that WPP has the most digital exposure of all the British ad agencies.
“If there’s anyone who can exploit that and make that trend work, it’s someone like Martin Sorrell.”
Beating Brexit
Moving forward, Jackson said she is seeking out companies that “are in a position to beat Brexit”, which play off global themes like cybersecurity (GB Group) and firms that are likely to benefit from the higher inflationary environment, like discount retailer B&M.
She is also chasing opportunities in the logistics sector, banking on warehouse owner Hansteen.
“As a UK manager only, I want to find those companies that can do well whatever happens with Brexit.
“I do feel nervous about the UK economy definitely but that doesn’t mean you shouldn’t invest in UK stocks or funds. You just have to be more selective now.”
