Investments  

Matthews puts stamp on UK Alpha Plus

Schroders’ Philip Matthews will keep the Alpha Plus brand on the fund he assumed from Richard Buxton in spite of a significant change in strategy.

Mr Matthews took over the fund in October 2013 after joining from Jupiter as the permanent replacement for Mr Buxton on Schroders’ flagship UK Alpha Plus fund, following the latter’s move to Old Mutual Global Investors.

Mr Matthews has set about overhauling the portfolio to fit the successful process that he employed for seven years in charge of Jupiter’s £365m Growth & Income fund.

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In spite of the managers’ differing styles, he said he is “very comfortable” with the Alpha Plus title, which applies to five of Schroders’ equity products.

“Alpha funds have historically been marketed as very concentrated funds – in order to be an alpha fund, you’ve got to have a small number of very high conviction ideas,” he said.

“[I want to] generate alpha through high risk-adjusted returns. That can be done in different ways, but I want it to be consistent in rising and falling markets. If you look at the historic alpha of my old fund over a long period of time, it was very high without lots of market risk.”

Mr Matthews said he is “a long way through” the process of adapting the Schroder UK Alpha Plus fund. This has involved selling and reinvesting roughly 40 per cent of the fund’s assets, and reducing “stock-specific risk” by increasing the number of holdings.

The manager has sold down a number of the portfolio’s most cyclical, domestically focused companies and moved to a more defensive position. But he emphasised this was a reflection of his view of markets and valuations, not a comment on Mr Buxton’s strategy.

“Having been out of the market [since leaving Jupiter] and come back in, I felt these areas had done very well and had been a good place to be since 2012. You don’t want to have such a big exposure at a time when there are potentially more headwinds,” he said.

Among Mr Matthews’ chief concerns is the effect of a Chinese economic slowdown on wider global markets.

The manager said: “One concern is the extent to which China can continue as an engine of global growth without any hiccups, and the extent to which that is linked to US tapering and emerging market currencies. There has been some slowdown in demand, but does that get incrementally worse?”

In the seven years Mr Matthews ran the Jupiter Growth & Income fund, from April 2006 to April 2013, it ranked in the top 10 per cent of funds in the ultra-competitive IMA UK All Companies sector, with a 76.2 per cent return. In the same period, Richard Buxton’s Schroder UK Alpha Plus fund gained 62.7 per cent.