Square Mile has maintained its A-rating for the SVM UK Opportunities fund, despite a change in ownership under Assetco, while stripping Hugh Sergeant’s newest fund of the top accolade after disappointing performance.
Run by lead manager Neil Veitch and deputy manager Craig Jeruzal, SVM UK Opportunities is among the top performers in the IA UK All Companies sector over three and five years. But recently the £169m fund’s performance has been below average, with returns at -16.8% over the past six months versus -12.9% for the sector.
Although the research firm said Assetco’s acquisition of SVM Asset Management would likely be “material at the corporate level”, its analysts do not anticipate this resulting in changes to Veitch’s underlying philosophy and process.
But Square Mile said they would closely monitor SVM’s transition to the Martin Gilbert-backed company as the £10.7m deal completes later this year.
See also: Fundsmith Equity retains Square Mile rating despite cloud of section 166 review
Sergeant fails to replicate success of UK strategies
However, the R&M Global Recovery fund was not so lucky, being booted from Square Mile’s Academy of Funds in its June ratings round-up.
Like SVM, River and Mercantile (R&M) is a fellow Assetco subsidiary, having been acquired by the asset manager consolidator in a £100m all-share deal that completed in April.
The £347m Global Recovery fund was launched by Sergeant, one of R&M’s founding partners, in 2013, following on from the success of his UK Equity Alpha and UK Recovery funds.
Square Mile analysts said while they acknowledge Sergeant’s “lengthy investment experience and impressive long-term track record running UK equity strategies”, this has not been repeated within a global equities mandate.
“Over time, the fund has struggled to meet the analysts’ expected outcome and following a lengthy review, they have taken the decision to remove the fund from Academy.”
R&M Global Recovery has returned 11.3% and 18.8% over three and five years, landing it in the fourth quartile of the IA Global sector, with the average fund returning 20.2% and 42.8% over the same time frame.
Sergeant’s two UK equity strategies are both top quartile over three and five years.
Simple philosophy pays off
In place of Sergeant’s fund, Guinness Global Equity Income has been added to Square Mile’s Academy with an AA rating.
Square Mile touted Ian Mortimer and Matthew Page as “impressive [co]-managers with a robust performance track record”.
The pair’s simple philosophy of owning quality companies that maintain high returns on equity, good profit margins, low leverage, and strong balance sheet has paid off during the severe market lows of 2022. It is currently in the top of the IA Global Equity Income sector over all major time frames.
On top of this, it has grown its dividend stream year-on-year continuously since inception, excluding 2020.
“Square Mile believes this fund to be suitable for investors seeking a growing dividend stream from a global mandate, but with a total return mindset and a lower volatility profile than the broader market.”
