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R&M UK Equity Long Term Recovery

Elite Rated by FundCalibre

Finding the companies that are yet to deliver their promise is the aim of this fund. Manager Hugh Sergeant holds a large portfolio of these out-of-favour companies, where he believes the management have the capability to turn things around. Buying them at prices below what the market values them at is the driver of performance.

Company Description

River and Mercantile Asset Management is a boutique investment specialist, which was incorporated in 2006. Awarded the Elite provider for Equities Rating in 2016, it now forms the asset management part of a wider group, following its merger with institutional adviser P-Solve, and a stock market listing in 2014. The fund management team specialises in UK and global equities.

The investment team has developed an individual philosophy and process called PVT: Potential, Value and Timing. They have a quantitative process which underpins all their investment choices.

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Fund Manager

Hugh Sergeant has been running this fund since launch in 2008, adding to his successful running of the UK Equity High Alpha fund, when he joined the River & Mercantile team as CIO of Equities. Recently, he added the World Recovery fund to his repertoire. He has a diversified background, starting with an economics degree from LSE to having stints at Gartmore, UBS and GLG, with Hugh about to mark 30 years in the financial world.

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Today continues to represent the best opportunity to buy value type shares since the end of the TMT bubble in 2000.

Hugh Sergeant - Fund Manager

The Investment Process

As the name suggests, Hugh is looking for recovery stocks, where good businesses are currently experiencing below normal profit levels, which are depressing their valuations. If they have the capabilities to help themselves out of this predicament, Hugh will take them onboard. He believes though, that it is crucial to meet company management first to ensure they are the right people to set their company on a long term recovery. For portfolio construction, they use a strategy called PVT (Potential, Value & Timing), enabling them to highlight stock opportunities and build positions based on their own bespoke analysis. The final portfolio will hold around 150-200 stocks.

Risk

Having such a diluted portfolio adds a large amount of diversification, therefore reducing stock-specific risk greatly. However, the nature of the fund is to find stocks that have been beaten up by the market and therefore, sentiment could continue to go against them. The fund is designed to perform over a longer duration than many and investors should be prepared to stay onboard for the journey.

Our Opinion

Hugh has a wealth of experience at his disposal, creating a track record of beating the index by 4.5% over his 21 years of investing. With the market as volatile as it is currently, Hugh has been able to make additions to his holdings at almost fire-sale prices, further increasing the possibility of long term capital appreciation, as well as dis-correlation from the benchmark.

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©2014 FundCalibre Limited. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not ,guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund or of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating.