Cazenove Growth & income fund has raised £45m in assets less than a month after launch
The Cazenove Growth and Income fund has been awarded a Standard & Poor's AAA rating just three weeks after launch.
The strength of manager Tim Russell's following can also be seen in the raising of £45m in assets less than a month after launch, some £20m of which followed Russell from HSBC via an in specie transfer.
The portfolio is expected to continue to grow quickly as a result of fund of funds and Isa money flows.
A number of fund of fund managers, including Rothschild's Bambos Hambi and Richard Philbin of Isis, have followed Russell to Cazenove.
Philbin pulled his £20m stake in HSBC Growth and Income immediately after Cazenove announced the Russell deal and has begun building a position in the new fund.
Philbin said he has already invested just under £5m in Cazenove Growth and Income, split roughly 60-40 between his balanced and growth mandates respectively, and will look to increase this over the coming weeks.
Russell's fund has also been placed on Credit Suisse First Boston Fund Lab's list of recommended funds, which could lead to inflows from the Continent.
Robin Minter-Kemp, head of retail at Cazenove Fund Management, said the group is working on issuing a separate share class for fee-based intermediaries. The current initial charge is 3.5%, which includes 3% intermediary commission, giving the group scope to offer the fund with a low front end through this channel.
Cazenove has also agreed to rebate 20% of the 1.5% annual management charge to retail investors should the fund fail to outperform the FTSE All-Share in any 12-month period, as revealed in Investment Week earlier this month.
The fund's mandate mirrors Russell's previous funds in that it will aim to outperform the All-Share by 1.5% on a rolling 12-month basis from its 31 December launch, with tracking error kept within the 2.5%-4.5% range.
While the tracking error restrictions will impact stock selection to an extent, Russell is unconstrained in sector weightings, although he will avoid overweighting small-cap stocks to ensure the investment process is scaleable. He expects the fund's number of holdings to range from 70 to 100.
Russell will continue to focus on business-cycle investing, incorporating both top-down and bottom-up inputs, backed by 10 analysts and Anne West, the group's head of investments.
'The key business cycle this year is the slowdown of UK consumer spending,' Russell said. 'The consumer has had it good over the past three years but with tax rates going up in April and inflation likely to rise, we expect to see a slowdown in consumer spending.'
Russell has responded by launching with half market weight positions in the media and retail sectors. He remains bearish on the advertising cycle and is wary of retailers following poor Christmas trading figures and the expected slowdown in consumption.
He is also underweight financials but sees opportunities in the sector on both a growth and income basis, which he will look to exploit if valuations drop further, as he expects.
'We are looking to buy into any weakness in the banking sector ahead of the results season,' he noted. 'Banks are generally yielding 4%-5%, which is attractive relative to other asset classes.'
Minimum investment is £3,000 for Isas or Isa and Pep transfers and £1,000 for lump sum investments.
For further details, call 0800 0159 592.
Launched November 2018
£15m group claim
'Nothing particularly different' - expert
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