Trustnet Magazine Issue 13 December 2015 | Page 12

IN FOCUS

FUND

SCHRODER RECOVERY
This is the worst performing IA UK All Companies fund in 2015, but it has a habit of
following a year of underperformance with at least 12 months of top-quartile gains

U

K value funds have
underperformed of late as
worries about fundamentals
have led equity investors to opt for
“safer” mega caps, causing quality
and growth stocks to dominate
markets.
Over the longer term, however,
value has proved to be a rewarding
destination for investors’ cash,
particularly following periods of
underperformance.
Schroder Recovery has been hit
harder than any other IA UK All
Companies fund by the fall from
grace of value stocks and is the
worst performer in the sector in
2015. It is down 11.39 per cent so
far this year, compared with gains
of 5.26 per cent from its peers and
2.28 per cent from its FTSE All
Share index benchmark.
However, FE Analytics data
shows Schroder Recovery has
been a top quartile performer in
the highly competitive sector since
managers Kevin Murphy and Nick
Kirrage took charge in July 2006.
It has made 107.73 per cent over
this time, meaning it has beaten
the FTSE All Share by almost 40
percentage points.
Investors in this fund can also

draw comfort from the fact that in
every one of the years it has fallen
into the fourth quartile, in 2005,
2007 and 2011, it has shot into
the top quartile in the following
12-month period. In both 2007 and
2011, its underperformance was
followed by three years of topquartile returns.
Kirrage and Murphy’s
investment strategy revolves
around finding out-of-favour
companies that they believe are
set for a reversal in fortunes. The
portfolio is currently overweight
financials (at 29.7 per cent of
total assets under management),
particularly the banking sector,
which the two managers think
represents one of the cheapest
parts of the UK market. RBS,
Barclays, HSBC and Aviva all sit
in the fund’s top 10. Oil producer

BP and supermarkets Tesco and
Morrisons also feature.
Of the recent underperformance,
Kirrage says: “Many investors are
nervous about the world and in
particular, investing more money in
equities at today’s levels. Investors
could argue that it’s all very well
investing in the recovery approach
for relative outperformance over
the next five years, but does
that really matter if markets fall
significantly?”
“Looking back over time, it’s fair
to say our approach typically does
not do well towards the tailend
of bull markets – investors could
potentially argue that today’s
underperformance is consistent
with that pattern and suggests a
future equity market setback.”
The fund has a clean ongoing
charges figure of 0.91 per cent.

PERFORMANCE OF FUND VS SECTOR AND INDEX IN 2015
15%

FTSE All Share (2.28%)

Schroder Recovery (-11.39%)
IA UK All Companies (5.26%)

10%
5%
0%
-5%
-10%

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

-15%
Jan 15

MANAGERS: Kevin Murphy and
Nick Kirrage
FUND SIZE: £756m
LAUNCHED: 5/5/1970
OCF: 0.91%

Source: FE Analytics

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