Two Equity Funds to Watch

Here we examine two investment funds and assess what they have to offer investors in terms of investment potential.

 Cape Wrath

VT Cape Wrath Focus Fund

Editor-in-chief at What Investment Lawrence Gosling, reviews this ‘high conviction’ UK equity fund.

The annual management charge of the VT Cape Wrath Focus Fund, a high-conviction UK equity strategy, is being fully rebated for all existing and new investors from 1 April 2021 until 31 March 2022.

Cheaper fees are not the only reason to consider looking at a fund like this, but it’s a good starting point for what is a small offering in terms of assets under management (AUM) and wouldn’t necessarily be on investors’ radar.

Manager Adam Rackley, the investment director at Cape Wrath Capital, is a talented stockpicker with a good history in the industry. He worked at Montanaro before he started Cape Wrath, named after a beautiful spot in Scotland.

The fund has a ‘value’ style, uses the MSCI UK IMI as its benchmark, and is in the Investment Association UK All Companies sector.

For the duration of the annual management charge rebate, the ongoing charges figure (OCF) of the GBP A-share class will be capped at 40 basis points, with the OCF falling as assets increase, with £50m of AUM corresponding to an indicative OCF of approximately 12 basis points.

Rackley comments: “The risk/reward in the value corner of the UK equity market is as attractive as we’ve ever seen it, offering a once-in-a-lifetime opportunity to buy decent businesses at bargain prices, supported by earnings upgrades.”

Cape Wrath Capital is a UK equity boutique delivering high-conviction – 20 best ideas – low-cost stockpicking, through a differentiated value strategy that aims to profit from turning points in investors’ analytical narratives and emotional journeys.

The firm has a single investment strategy, and high co-investment ensures strong alignment of interests.

I would rate this 4/5.

TB Evenlode Global Equity

Darius McDermott, managing director, Chelsea Financial Services, looks at a global equity fund he rates highly.

Evenlode Investments has launched a global equity fund under the management of Chris Elliot and James Knoedler. Typically holding fewer than 40 stocks, TB Evenlode Global Equity was launched last year but has just been made available to retail clients. It has a bias towards larger companies with growth opportunities and the same investment process as the popular TB Evenlode Global Income Fund, which is co-managed by Elliot. The only difference is this new fund doesn’t have a dividend mandate.

The managers look for three specific characteristics when

choosing stocks for this fund: attractive structural growth opportunities; sustainable competitive advantages; and sustainable reinvestment that safeguards and extends their businesses. Portfolio turnover is expected to be low.

The fund has a minimum investment of £1,000 with an ongoing charge of 0.85%*. It currently has half its exposure in North American equities, while, from a sector perspective, a third of the portfolio is currently in technology stocks*.

When we speak to fund managers one of the first things we look for is a solid, repeatable process. The team at Evenlode has exactly this on both the income and global income funds they have launched with much success. This is the next logical step, and we see no reason why this fund cannot replicate their prior success – albeit in a very competitive market.

I would rate it 4/5.

*Source: Provider factsheet at 28 February 2021.

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’s views are his own and do not constitute financial advice.

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