Buffettology fund cash at six-year low on brighter view for UK shares

Fund manager Keith Ashworth-Lord has turned more bullish following the Brexit trade deal.

The Castlefield CFP SDL UK Buffettology fund, one of interactive investor’s Super 60 choices, is running its lowest cash weighting since 2015 as the manager’s confidence in the outlook for UK companies grows.

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Investors seem to have a similar view, pouring £73.4 million of net inflows into the £1.5 billion fund over the last year. Fund manager Keith Ashworth-Lord has used £16.8 million of this money to top up some of the portfolio’s holdings, reducing the fund’s cash as a proportion of net asset value from 6.5% to 3.9%.

“This is the most fully invested that the fund has been since May 2015 and is a reflection in my confidence for the future of the UK economy and UK equities as Covid-19 and Brexit become events in the rear-view mirror,” the manager says.

‘Renewed enthusiasm’

The fund enjoyed a strong December, a month in which Covid-19 vaccine roll-outs and a Brexit trade deal helped cement a ‘Santa rally’ in financial markets.

Writing in his December investment commentary, the manager notes: “Not even talk of more transmissible variants of [Covid-19] and an impending renewed lockdown in the new year, nor the demonstrable strength of sterling could dent the renewed enthusiasm for UK equities. Consequently, the fund had a strong month in December with the general income (I) class share price rising by 6.4%, outpacing the 3.7% gain for the UK stock market.”

Over the month, 25 of the portfolio’s stocks made gains, while seven posted losses. Some 12 of the gainers enjoyed double-digit returns, led by NCC Group (LSE:NCC), up 25%. Other strong performers included Softcat (LSE:SCT) and MJ Gleeson (LSE:GLE), up around 20% each. The inflows the fund saw in the previous month reversed in December to a net outflow of £22 million.

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A famous philosophy

The objective of the fund is to beat its peer group over five to 10 years by holding UK companies with strong operating franchises and experienced management teams, following the investing philosophy of Warren Buffett.

Over the last year, it has returned 1.9% to investors compared to a 3.7% fall for the Investment Association’s UK All Companies sector, while over three years it has returned 28.7% against 3.1% for the peer group, according to FE Analytics.

Sandford DeLand had been planning to launch a small-cap trust, the Buffettology Smaller Companies investment trust, towards the end of 2020, but the IPO was shelved due to lack of investor demand. The group had hoped to raise £100 million for the trust, which was to be managed by Ashworth-Lord. The idea was to enable him to access some of the opportunities he sees in UK smaller companies, which are harder for him to hold through the UK Buffettology fund, due to its increased size.

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ii view

The UK Buffettology Fund is a UK Equities Adventurous recommendation in the interactive investor Super 60 list of high-conviction active and passive funds. It provides exposure to high-quality UK companies selected by Keith Ashworth-Lord, the UK’s very own Warren Buffett. The strength of his stock-picking skills combined with a strong risk-adjusted performance make this a good fund choice.