How Does Richard Buxton's Performance Stack Up?

In the first of a new series, Morningstar compares the performance of Richard Buxton's Old Mutual UK Alpha Fund to the passive L&G UK Index Trust

David Brenchley 5 March, 2018 | 8:22AM

tortoise versus hare road sign, active versus passive, richard buxton, old mutual

Richard Buxton is one of the top fund managers in the UK. He has racked up more than 30 years of impressive performance first at Schroders, and then at Old Mutual Global Investors, where he is currently chief executive.

But does the recent performance of his Morningstar Silver Rated Old Mutual UK Alpha Fund continue to justify his star status? We compared the offering with a similarly rated passive fund, the L&G UK Index Trust.

The L&G fund was chosen as it tracks Buxton's benchmark, the FTSE All-Share, and ticks the same Morningstar Style Box of large-cap value.

The Performance

Buxton joined OMGI in June 2013, but has been running the fund since December 2009, initially on an outsourced basis while with Schroders.

During a time where value-oriented investing has struggled, his fund has performed well since 2009, returning 124%, compared to the L&G fund’s 99%.

Interestingly, the fund’s performance relative to the passive vehicle was much better when he was managing it in conjunction with his work with Schroders compared to since joining OMGI full time.

Between 2009 and 2013, he well outpaced the tracker, returning 64% compared with 47.5%. Since he joined OMGI permanently, both have similar performance: Buxton gaining 36.67%; the tracker 35.14%.

In the past year, Buxton’s also ahead, despite global stock markets having powered ahead in that time. The UK Alpha fund is up 5.88% compared with the L&G’s 3.23%.

However, while the long and short-term numbers are in Buxton’s favour, the intermediate three-year figure, which is generally most widely watched, is a different story. The L&G fund has returned 18.47% compared with Old Mutual’s 13.73%.

As Morningstar analyst Simon Dorricott asserts, combining the two roles “is not desirable”. However, he notes that Buxton “clearly remains engaged with the investment process” and that the two roles are manageable considering the strong support he enjoys from his team.

The Portfolio

Buxton’s long-term, contrarian approach sees him look for stocks he believes are underpriced relative to their long-term growth prospects. He currently has an overweight in financials, which represent a quarter of his 34-strong portfolio.

Banks HSBC (HSBA), Lloyds (LLOY) and Barclays (BARC) – the three favoured UK retail banking giants – are all in the top 10 holdings. He also has an overweight to consumer cyclicals and tech.

The Old Mutual fund has no real estate firms, and a big underweight to consumer defensives compared with the L&G fund, which has top-10 positions in both British American Tobacco (BATS) and Diageo (DGE).

Morningstar analyst Hortense Bioy likes the L&G fund as well. She explains that it more than holds its own versus active and passive peers, landing in the second quartile in 12 out of the past 14 years. Bioy adds that L&G tries to add value above the index returns by implementing techniques such as trading in advance or arrears of index changes, enhancing dividends and cross-trading.

The Old Mutual fund has an ongoing charges fee of 0.85%, compared with 0.1% on the tracker.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Barclays PLC158.44 GBX-0.36
British American Tobacco PLC2,660.00 GBX-1.54
Diageo PLC2,825.00 GBX-0.70
HSBC Holdings PLC653.50 GBX-0.37
L&G UK Index Trust I Acc283.21 GBP-0.49
Lloyds Banking Group PLC52.70 GBX-0.77
Old Mutual UK Alpha R GBP Acc  -

About Author

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk