Schroders’ Buxton rebounds to top quartile

Schroders’ £2.9bn UK Alpha Plus manager Richard Buxton rocketed back into the top quartile in the first quarter after taking advantage of bearish sentiment.

In a quarterly fund update Mr Buxton said he used the “extreme low” in investor sentiment at the beginning of 2012 to add to a number of his favoured holdings, on share price weakness

These included broker ICAP, which he said was “oversold” during the back of 2011, cruise ship operator Carnival, shares of which plunged when its Costa Concordia ship hit the rocks off the coast of Giglio in January, and electricity producer Drax Group, amid electricity price rises.

The Schroders fund bounced back to the top quartile for the first quarter of 2012 with a return of 11.5 per cent compared with the IMA UK All Companies sector average of 8.9 per cent, according to Morningstar.

The positive numbers come after the fund posted a fourth quartile loss of 9.9 per cent in 2011 compared with the sector average loss of 7 per cent, the data provider said.

The fund now ranks second quartile over three years with a return of 58.2 per cent compared with the IMA UK All Companies sector average of 54.4 per cent, Morningstar said.

Mr Buxton said the fund’s strong performance in Q1 has also been in part down to consumer plays, including clothing retailer Debenhams and Home Retail Group, although Mr Buxton acknowledged the potential strain the UK consumer would remain under.

“While we are encouraged by their share price rallies, we accept that the UK consumer remains stressed,” he said.

“However, both companies possess strong balance sheets and this financial strength greatly increases the likelihood that they will survive tough trading conditions in the short term.”

The manager also said cyclical stocks which had performed poorly in the final quarter of 2011 had rebounded this year.

Elsewhere, Mr Buxton said the largest contributor to returns was Misys, the financial services software specialist, after Texas-based Vista Equity Partners agreed a £1.27bn cash bid for the company which has been recommended by Misys’ management.

He also hailed tech stock Logica for its rebound following a profit warning last year and housebuilder Taylor Wimpey for boosting returns, with the latter announcing it would return to the dividend register for the first time since 2007.

Mr Buxton also said the fund’s financial holdings, including UK banks, had performed well.

“A number of the fund’s financial holdings, including Lloyds Banking Group and RBS, rebounded as measures to improve liquidity by central banks were well received by the market,” he said.

“Life assurer Legal and General rallied after increasing its dividend by 35 per cent – the second major increase in the past two years.”

Mr Buxton also said his underweight positioning in the telecommunications and oil and gas sectors contributed to relative returns.