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The UK equity sector where most FE fundinfo Alpha Managers come cheap

31 January 2023

The majority of funds that are run by FE fundinfo Alpha Managers in the IA UK Equity Income sector charge below-average fees.

By Matteo Anelli,

Reporter, Trustnet

Portfolio managers that have achieved the FE fundinfo Alpha Manager status aren’t in great numbers in the IA UK Equity Income sector, where only six out of the 86 funds can claim the title.

But, in contrast to what happens in the IA North America sector, where experience comes at a price, only two of the six managers charge a greater ongoing charges figure (OCF) than the sector average of 0.83%.

As the cost of investing is decreasing and fees are becoming more transparent, thrifty investors who dislike excessive charges chipping away from returns are increasingly turning to cheaper options, where these are available.

In the IA UK Equity Income sector, they don’t have to look far and long to find cheap but experienced teams.

Here, the least expensive fund run by an FE fundinfo Alpha Manager is Octopus UK Multi Cap Income, which charges 0.45% yearly.

The fund is managed by Chris McVey, with FE fundinfo Alpha Manager Richard Power acting as deputy manager. The team, which also includes Dominic Weller, has a bias towards small and mid-cap equities, which it thinks are able to provide “above average income and capital growth”, but may also invest in large-cap and international equities including FTSE 100 constituents.

Since 2020, the fund grew its assets under management from approximately £12m to the current £63m, and since its launch in November 2018, it has returned 42.7%, almost doubling the sector average of 24.6%.

Moving down the list, three more funds that are run by FE fundinfo Alpha Managers charge below-average fees, but only one of them has outperformed its average peer over the past four years, as illustrated by the line chart below.

Performance of fund vs sector since launch
 
Source: FE Analytics

Slater Income is managed by Mark Slater and his team and positioned itself slightly below the 0.83% cut-off point, with an OCF of 0.81%.

It has returned 158.8% since the fund launched in 2011 and managed to contain losses in 2022. During the 12 months of the past year, it lost 2.9%, only slightly below the sector average of -1.7%.

In that period, the fund’s exposure to BP, Diversified Energy and Shell penalised returns, as all three were among the fund’s top five detractors.

 

Further down the list, HL Select UK Income is the second cheapest fund with an OCF of 0.6%, narrowly edging out the Liontrust UK Equity Income fund, which costs 0.65% per year.

The former has not managed to deliver a superior return compared against average peer since its launch in 2017, making a total 14.1% over this time.

Conversely, the Liontrust UK Equity Income fund is joined on the list by and Liontrust Income, which charges 0.84%. Both are run by Alpha Manager Chris Field and Dan Ekstein, who took charge of the former in 2021 and the latter in 2022, replacing industry veteran Robin Geffen, who was moved off the fund.

Since the pair took charge of the funds, the former is up 4.9% while the latter has made 10.2%, both of which are a few percentage points behind the sector average (9.6% and 7.8% respectively).

Lastly, the most expensive fund in the sector was Marlborough Multi Cap Income, with an OCF of 0.85%. Managed by Siddarth Chand Lall, the fund has made a total return of 110.2% since its launch in 2011 but has struggled in more recent years, making a bottom-quartile return of -9.9% over the past three years.

All OCFs are from the main share class in FE Analytics. Different share classes may come with varying fees.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.