Two funds in, two funds out of Active Growth portfolio
We explain changes made to our Active Growth model portfolio.
31st January 2022 13:13
by Kyle Caldwell from interactive investor
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We explain changes made to our Active Growth model portfolio.
Following the announcement earlier this month that interactive investor has handed over the day care of its rated lists to Morningstar’s Manager Selection Services Group, some changes are being made to the Active Growth model portfolio.
Two funds are exiting the portfolio, following their removal from the Super 60. The funds are Liontrust Special Situations and CFP SDL UK Buffettology. Both were removed from the Super 60 due to concerns over their fund sizes.
Their replacements, in both the Super 60 and the Active Growth portfolio, are Ninety One UK Alpha and Jupiter UK Special Situations.
Both will have a 10% weighting in the model, and the changes will be effective from 1 February 2022.
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Ninety One UK Alpha is managed by Simon Brazier. He joined Ninety One (formally called Investec) in December 2014 from Threadneedle, where he was head of UK equities.
Morningstar says: “The investment process blends fundamental, bottom-up stock research with top-down analysis, and the manager believes that a clear understanding of the macroeconomic and thematic background is a vital starting point.
“The fund benefits from a strong and experienced team, a clearly defined approach and strong execution thereof.”
Jupiter UK Special Situations has been managed by Ben Whitmore since November 2006. The fund has a value bias, which Morningstar notes can lead performance to “deviate significantly from that of the index from time-to-time”.
It added: “The investment approach reflects the fund manager’s contrarian and value-oriented investment philosophy. They aim to identify longer-term valuation anomalies by looking for stocks that have an attractive P/E ratio when calculated using 10-year average earnings, but are nevertheless well-run companies with sound balance sheets.”
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The other eight members of the portfolio remain unchanged. Scottish Mortgage (LSE:SMT) and Fundsmith Equity have target allocations of 15%. The four unchanged 10% weightings are: Fidelity Global Dividend, F&C Investment Trust (LSE:FCIT), JPMorgan Emerging Markets(LSE:JMG) and Jupiter Strategic Bond. The remaining 10% of the portfolio is split 5% each between Capital Gearing (LSE:CGT)and Standard Life Private Equity (LSE:SLPE).
Since 1 October 2021 all five model portfolios have been automatically rebalancing every three months.
Commenting on the removal of Liontrust Special Situations, Morningstar said: “The fund is one of the largest UK equity funds in the market but maintains a dedicated allocation to small and mid-cap companies. This means that the fund has to choose between having high ownership of a company or owning smaller portions of more companies.
“We feel that this means the managers cannot fully express the fund's investment process and that they may end up owning companies in which they have lower conviction just to spread the money.”
CFP SDL UK Buffettology was previously placed under review by interactive investor owing to concerns about the size of its assets. Morningstar says that “if inflows continue, then the strategy could either run into problems or [it could] change how the fund is run, for example, investing in large companies when historically their success has come from smaller companies”.
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It added: “We recognise that the strategy has delivered very strong performance, but due to the possible risks or uncertainties we have lost confidence that this return profile can be replicated in the future.”
Over three years (to 31 December 2021), the ii Active Growth portfolio has returned 68.3%, comfortably ahead of its benchmark return of 44.9%.
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