REWARDS:
■ Strong track record
■ Well respected management
■ Flexibility to take advantage of opportunities
■ Defensive stance has served the fund well
RISKS:
■ Poor performance in 2008
■ Economy could continue to deteriorate
Amongst the welter of predictions and forecasts for 2009, there is a broad consensus that the economy will start to improve at some point in the second half of the year, and that the stock market will start to improve a few months before that. Of course, the consensus might well turn out to be wrong, but for investors who subscribe to that cautiously bullish stance, the Artemis UK Special Situations fund is a good way to grab a slice of the action.
The fund has been run since its inception in 2000 by Derek Stuart, and under his guidance it has garnered an impressive reputation. It has outperformed the FTSE All-share (in terms of total returns) over the last one, three and five years, and has comfortably beaten its fund sector average, earning itself a first quartile ranking. The 28 per cent fall recorded over the last 12 months is disappointing, but it is better than the FTSE All-Share has managed.
Part of the reason for the fund’s strong performance over the long term is that Mr Stuart does not try to stick too rigidly to a benchmark. As with many other special situations fund managers, he has considerable freedom over the companies and sectors in which he chooses to invest. So, halfway through 2007, he decided to move away from mid and small caps, and into large caps. The decision has served the fund well – the mid and small cap sectors have underperformed badly in 2008. Those special situations funds that stuck with a small cap bias in 2008 have suffered as a result.
Mr Stuart has stuck with his large cap, defensive bias since then, with little in the way of radical change to the portfolio. But that is slowly starting to change as he picks out potential recovery plays and starts to invest in them. In particular, he is interested in companies which offer the prospect of “self-help”, perhaps because of a management change. Recent investments Booker and Bodycote both fit the bill. Valuation also plays an important part. In November, for example, he started buying into cash generative resources companies such as Premier Oil and BG. To finance these purchases, he has been moving out of some of the more defensive holdings such as AstraZeneca and National Grid.
Key fund data:
| ARTEMIS UK SPECIAL SITUATIONS FUND | |||
|---|---|---|---|
| PRICE: | 233p | SHARPE RATIO | negative |
| SIZE OF FUND: | £686m | 1 YEAR PERFORMANCE | -27.9% |
| No OF HOLDINGS: | 78* | 3 YEAR PERFORMANCE | -12.9% |
| SET UP DATE | 9 Mar 2000 | 5 YEAR PERFORMANCE | 26.8% |
| MANAGER START DATE | 9 Mar 2000 | TOTAL EXPENSE RATIO | 1.56%* |
| TURNOVER | na | YIELD | na |
| VOLATILITY | +2.87 | MINIMUM INVESTMENT | £1000/£50 per month |
| TRACKING ERROR | +2.02 | MORE DETAILS | www.artemisonline.co.uk |
Source: FT.com, Artemis
*Source Morningstar
All new investments are chosen via a bottom-up stockpicking approach, rather than a top-down macroeconomic view. Mr Stuart favours close contact with company management and pays close attention to the accounts. He’ll be aided in his endeavours by Ruth Keattch, who developed a formidable reputation at Deutsche Asset Management. She joined the fund in September to focus on opportunities in the small and mid cap markets.
