Fund spotlight: River & Mercantile UK Recovery
An interactive investor analyst offers a view on one of our Super 60 fund picks.
12th April 2021 17:40
by Teodor Dilov from interactive investor
An interactive investor analyst offers a view on one of our Super 60 fund picks.
The Super 60 fund
Listen or read about the fund, it’s your choice.
River & Mercantile UK Recovery Fund fund is managed by Hugh Sergeant, who has a wealth of experience and runs a very well-diversified portfolio of around 300 shares, with approximately one-third of assets allocated to UK large-cap companies.
Sergeant invests in recovery stocks and identifying good businesses that are currently experiencing below-normal profit levels – which are depressing their valuations. To be included in the portfolio, a company must demonstrate both its capabilities to grow shareholder value and evidence for improving earnings.
It is also typical for the manager to buy stocks at fire-sale prices during times of market turbulence. However, bear in mind that due to how the fund invests, the performance could significantly deviate from its FTSE All-Share benchmark.
- ii Super 60 investments: quality options for your portfolio, rigorously selected by our impartial experts
- Funds Fan: UK funds back in form and post-Covid recovery share ideas
What does it invest in?
The investment universe of the fund is dominated by value stocks. Companies that offer domestic exposure and have a strong franchise are typical potential candidates. Last year, the manager became more aggressive towards cyclical stocks, as well as to deep value stocks such as banks and insurance companies.
At a sector level, Consumer Discretionary, Communication Services and Materials are some of the other areas where the manager sees a lot of potential opportunities.
Within the top 10 holdings, there are familiar names such as BP (LSE:BP.) (2.4%), Royal Dutch Shell (LSE:RDSB) (2.2%), Unilever (LSE:ULVR) (2.1%), Lloyds (LSE:LLOY) (2.1%) and HSBC (LSE:HSBA) (2%).
- UK equity funds have a strong first quarter
- The UK shares the pros are backing to play post-pandemic recovery
- Mix and match to profit from recovery for value funds and trusts
Performance
| 08/04/2020 - 07/04/2021 | 08/04/2019 - 07/04/2020 | 08/04/2018 - 07/04/2019 | 08/04/2017 - 07/04/2018 | 08/04/2016 - 07/04/2017 | |
|---|---|---|---|---|---|
| ES R&M UK Recovery Fund | 61.70 | -25.74 | 2.34 | 6.46 | 36.64 |
| MSCI UK IMI Index | 27.06 | -20.80 | 7.19 | 2.27 | 23.91 |
| Morningstar UK Flex-Cap Equity Category | 40.71 | -19.63 | 2.94 | 5.01 | 19.09 |
Source: MorningstarÂ
Why we recommend it
This fund has a few unique selling points that investors should bear in mind. First is the track record of its manager. It is true that recently the strategy benefited from the market rotation towards value, but performance has been strong over a full market cycle, which is good evidence for active management adding value. Over 10Â years, the fund returned an annualised total return of 10.4% compared to 5.7% for the MSCI IMI benchmark and 7.7% for the Morningstar UK Flex-Cap Equity peer group.
Second, due to its broad diversification, individual stock risk is very limited, which in theory should provide a smother investment journey than other value funds over the long term.
To conclude, the manager has strong track record of employing environmental, social and governance (ESG) criteria in the investment process.Â
These articles are provided for information purposes only. Â Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. Â The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.