The other week, I caught up with Ben Peters, co-manager of the Evenlode Income fund.
His CV can make pretty scary reading when you find yourself sitting next to him making small talk: he's a Bachelor of Science (Hons) in astrophysics, a Master of Science in theoretical physics and has a Doctorate of Philosophy in nano electronics. Thank goodness we have funds in common.
In short, he's very good company and, having talked about his new venture – the Evenlode Global Income fund that launched last November – we got talking about the original UK version, Evenlode Income.
Mr Peters has run this fund since October 2009 with lead manager (and brother-in-law), Hugh Yarrow and together they also run the boutique fund management business, which now has 11 employees.
Mr Peters and Mr Yarrow try not to worry too much about individual world or market events, focusing instead on a small group of high quality companies that should be able to withstand pretty much any macroeconomic environment.
So it is more coincidence – and good judgement in terms of looking for better value companies – that saw the fund positioned almost perfectly on the day of the EU referendum.
With just 40 high conviction stocks in the portfolio, the fund has an average turnover of just 17 per cent per annum, which keeps the transaction costs nice and low at just 90p for every £1,000 invested (there is clear pricing on the website).
It also means that when it comes to active management, sometimes the managers' active decision is to do, well, nothing.
Their definition of high quality is a company with sustainable growth and limited need for capital reinvestment.
They share three characteristics: asset-light business models (intangibles are key), high barriers to entry and customer purchase decisions which are not based on price alone. This means that the fund has a bias away from capital-intensive industries and, as such, is underweight in oil and gas, and utilities.
The managers also tend to be underweight financials due to their inherent complexity and cyclicality.
In the run-up to the Brexit vote, the managers saw better value in the UK's larger companies and positioned the fund accordingly, leading to considerable outperformance in the aftermath of the referendum when sterling sank.
In the intervening 18 months, little changed until very recently when they added a couple more domestically-focused names showing value: Howdens Joinery and MoneySuperMarket.
One possible flaw is less about the fund itself and more about the sector: having been removed from the IA UK Equity Income sector a couple of years ago for failing to meet the yield requirement, Mr Peters and Mr Yarrow have decided to leave the fund in the IA UK All Companies sector.