nav up by 27% over the past six months under leadership of new manager Richard buxton
After a lengthy period of under-performance, the Schroder UK Growth investment trust's fortunes have turned around as recently installed manager Richard Buxton cuts back on small-cap exposure.
The trust's net asset value (NAV) has fallen by 46% over the three years to 30 July, well behind the sector's weighted average decline of 35%.
Charles Cade, investment trust analyst at Close Wins, said: 'The portfolio's long-term performance is dire due to a combination of gearing in weak markets and an ill-timed switch in investment strategy to a growth bias in early 2000. However, performance has turned around following the change in management.'
The NAV over the month to 30 July has grown by 4%, against a mean increase of 3%, while over six months it grew by 27%, compared to a sector weighted average of 24%.
The discount has narrowed significantly since Buxton's October 2002 appointment, from 15.3% on 30 September, when the sector weighted average was 12.1%, down to 6.9% on 30 July, against a sector average of 9.5%.
Buxton's first move on taking over management of the trust was to align its stock selection closer to the model portfolio of Schroders' UK specialist investment team, which he runs.
Under previous manager Chris Rodgers, the trust had a growth bias, with around 80% of holdings drawn from the team's buy list, with the remainder in small caps and stocks they did not favour.
Buxton said the trust now retains something of a cyclical orientation but its holdings are reasonably balanced.
'It has a 3%-6% tracking error against its benchmark the FTSE All-Share,' he noted. 'There is a sector weighting limit of no more than plus or minus 5%.
'Going forward, it is designed to be a reasonably balanced portfolio and we are quite positive for the market's outlook.
'The market is at a turning point in terms of both the corporate profit cycle and investor sentiment. The NAV has turned around as we have made a number of good sector calls.'
One recent example is United Business Media, a US technology magazines publisher. 'This has been a horrible market but we felt the rate of deterioration within the sector had stabilised,' Buxton said. 'On 29 July, the firm's interim results were published and the news was positive, with a 15% rise in share price.'
The portfolio is currently 13% geared, a level Buxton is comfortable with. 'It is important to be tactical in the use of gearing and when the market moves up, I will take it down,' he said.
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