Mark Dampier: Follow the fund manager who's ready to seize his opportunities
Saturday 24 May 2014
A common complaint from advocates of passive investing is that it is impossible to identify great active fund managers at the beginning of their career. This is a perfectly reasonable criticism and one I agree with. Wait a few years though and it is possible to start picking winners.
Take Nigel Thomas, manager of the AXA Framlington UK Select Opportunities Fund, for example. He built a strong track record at ABN Amro from 1987 until he joined AXA Framlington in September 2002 to manage this fund. Those who invested at this point based on his experience would be pleased with the results. Under his tenure the fund has grown by 287 per cent compared with 168 per cent for the FTSE All-Share Index.
Mr Thomas is now 59 and facing speculation over when he will retire. He has made it clear to me that he has no imminent plans to do so. He still loves meeting companies and attends the office five days a week. Eventually, of course, he will retire, but the good news is succession plans are in hand with Chris St John lined up to take over. The pair already work closely together and Mr St John is doing a good job on the AXA Framlington UK Mid Cap Fund. It is good to see succession being considered at an early stage and I regard Mr St John as a safe pair of hands.
Mr Thomas tends to show a slight bias to smaller and medium-sized companies. With a fund approaching £5bn, you might think this could cause problems; however, he has never had any problem gaining exposure to his favoured smaller companies.
At present 60 per cent of the fund is invested in larger companies, slightly more than usual. There are two reasons for this. First, 20 per cent of the portfolio has been so successful it has progressed from the FTSE 250 index to the FTSE 100 over the past couple of years. This includes companies such as ITV, Travis Perkins and Weir.
The second reason is an active decision to increase exposure to some of the UK's largest companies – the so-called mega-caps. Mr Thomas feels recent changes to pensions legislation are a real game-changer. Essentially retirees have more flexibility over how they use their pension to generate an income and he believes this will create demand to invest in higher-yielding large companies.
The fund is overweight in pharmaceuticals via AstraZeneca, GlaxoSmithKline, Shire and BTG so the recent strong performance among pharmaceutical companies helped the fund.
Mr Thomas adopts a buy-and-hold approach, and does not get too concerned if some companies become moderately overvalued. He is happy to wait for earnings growth to catch up with share prices, even if it means a bit of short-term pain.
He believes companies capable of strong growth deserve to be highly rated, as some of his medium-sized company holdings such as Elementis and Rightmove are today. However, he is sure they continue to have good prospects and will continue to grow earnings over the next three to five years as well as returning cash to shareholders via dividends and share buy-backs. He also believes their profit margins are sustainable.
Elsewhere, he has reduced the fund's technology holdings over the past couple of years and now retains just two positions in the sector, Spirent and Imagination Technology.
He invested in the recent float of Poundland, "backing the man" with his experience helping him to identify successful management teams.
Performance so far this year has been behind the benchmark, as smaller and medium-sized companies have performed less well than larger counterparts. This trend could continue for a while, so it could be a tough year for this fund.
Mr Thomas's long-term track record speaks for itself, though, and I believe this remains a solid core UK fund. Long-term investors might even consider topping up on any weakness.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.hl.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Presents unwrapped, turkey gobbled... it's time to relax
Weekly Money: Round-up of the personal finance stories you may have missed 24-28 November
You'll need £220,000 for a minimum wage in your retirement
Simon Read: There may be trouble ahead for cohabiting couples who don’t make a will
Money Insider: Would £150 make you switch banks?
Bargain Hunter: Find the deals that have real value beneath the Black Friday hype
- 1 Jennifer Lawrence scores first UK top 40 single with Hunger Games track 'The Hanging Tree'
- 2 Shia LaBeouf claims he was raped during #IAMSORRY art installation performance
- 3 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
- 4 Scientists predict green energy revolution after incredible new graphene discoveries
- 5 Michael Buerk wishes he killed Jimmy Savile when he had the chance - by pushing him overboard a cruise ship
Obama: The only people with the right to object to immigration are Native Americans
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Ukip mocked after mistaking Westminster Cathedral – for a mosque
David Cameron sets out immigration reforms: We should distrust Ukip and their 'snake-oil of simple solutions'
iJobs Money & Business
Excellent Package: Austen Lloyd: EAST ANGLIA - SENIOR SOLICITOR LEVEL ROLE** -...
£Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...
£Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...
£90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens