Philip Matthews has turned over almost half the holdings in the Schroder UK Alpha Plus fund since taking over the fund from Richard Buxton in October, IFAonline sister title Investment Week can reveal.
In his first interview since joining Schroders, Matthews revealed he has sold around 40% of the portfolio, diversifying away from the domestically-exposed cyclicals long favoured by his predecessor to focus on different sectors.
“That was one of the things I felt was a problem when I took the fund over: it had Whitbread, IAG, Debenhams, Home Retail, Ladbrokes, Taylor Wimpey, Barclays, RBS, and Lloyds, which are all exposed to an improving domestic consumer,” Matthews said.
“We are moving into ideas like media, tobacco, and pharmaceuticals, where we think there is a better risk-reward trade-off.”
Matthews also urged investors to judge him on performance and not flows following redemptions from UK Alpha Plus. The £1.7bn fund has lost nearly £2bn since Buxton announced his departure to Old Mutual, with a large proportion of flows seen before Schroders appointed a successor.
However, Matthews said he is unconcerned with returning the fund to its former size of more than £3.6bn.
“You cannot do anything about the flows,” he said. “I am not overly panicked about them or getting this fund back to the size it used to be – that is not how I spend my day.
“The important thing is that flows stabilised after I got here and I have not had to deal with outflows while running the fund.”
Alex Breese, who joined Schroders’ UK equity team from Neptune last year, noted the issues both managers face in running funds several times larger than their previous mandates.
Breese took over Errol Francis’ £670m Schroder UK Equity fund, as well as the £488m L&G UK Select Equity fund, having previously run the £63m Neptune UK Opportunities fund.
“I am running this fund in exactly the same way as at Neptune, although at the margin one or two companies were too illiquid and tricky to buy,” he said.
“A good example is Euromoney: it is FTSE 250 but two-thirds owned by Daily Mail and General Trust. The remaining third is limited and shares are quite tightly owned.
“It had done particularly well so I was not too bothered about building a position there. If it had a big setback and there were people selling, we would look at it, but trying to buy a company like that which was illiquid and doing well would be hard.”
Matthews, who previously ran the £365m Jupiter Growth & Income fund, has also made a number of changes to account for the larger fund.
“From a liquidity standpoint, there is no major change, but there are bound to be examples of big positions in smaller companies which take longer to get out of,” he said.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation