Three value investing funds to back with clients’ money

Traditional value investor: Alastair Mundy, Investec UK Special Situations

Mr Mundy joined Investec in 2000 from Morley Fund Managers and is the head of the company’s value team. Alongside the £893.3m UK Special Situations fund, Mr Mundy is also the sole manager of the Investec Capital Accumulator and Investec Cautious Managed funds, and the Temple Bar Investment Trust.

Mr Admans says: “Mr Mundy has got it right time and again. He has a very well ingrained value approach to investing.”

In the past five years, the Investec UK Special Situations fund has delivered spectacular returns, almost doubling that of the FTSE All-Share, at 98.3 per cent compared with the index return of 53.13 per cent, according to FE analytics.

The fund’s top 10 holdings include companies such as Glaxosmithkline, HSBC and Vodafone.

Deep value investor: Richard Penny, L&G UK Alpha

Mr Penny is a senior fund manager in the UK smaller companies team at Legal & General Investment Management and has managed the £167.5m UK Alpha Trust since its launch in May 2005.

“He is one that follows a deep value and also strong growth,” explains Mr Admans. “With Mr Penny, you are not just buying a value driven portfolio and should get something when the markets are being driven by momentum.”

According to the fund’s factsheet, Mr Penny invests in both “deep value” and “strong growth”, with a typical holding period of between two and three years. The concentrated portfolio invests across the market cap spectrum and currently has a 50.71 per cent exposure to companies with a market cap of between £50m and £250m.

It’s largest stock exposure, according to the factsheet, is a 6.16 per cent weighting to Aim-listed Smart Metering Systems, a company that produces devices which help consumers and businesses cut utility bills and improve energy efficiency.

In five years, the fund has returned 78.79 per cent, a 25.66 percentage point outperformance when compared with the FTSE All-Share return of 53.13 per cent for the same period, according to FE Analytics.

Intrinsic value investor: Tom Carroll, Chris Rodgers and Edward Williams, Four Capital Active UK Equity

This is the most recent of the three value picks, having launched in June 2007, and Mr Admans admits that it perhaps isn’t one that would be on a large number of adviser radars.

“The Active UK Equity fund is quite interesting and they value stocks on intrinsic value - looking at all the parts of the business and the current price of the business to determine if there is sufficient upside after they have deducted the margin of risk they are willing to accept. ”, he says.

The managers ave a concentrated portfolio of between 40-50 stocks and key to the investment process is the focus on growing companies that demonstrate competitive franchises and strong cash generation. The co-managers, in the analysis of the investable universe, seek to establish “the true worth of the business”, or its ‘intrinsic value’.

In five years, the fund has lagged its FTSE All-Share benchmark, returning 52.65 per cent, compared with the index return of 53.13 per cent, according to FE Analytics.

Mr Admans says: “The managers have had years of experience at the likes of Schroders and they are probably not ones that appear on everyone’s radar. It is worth a look.”