Best in Class: Investec UK Alpha

I wonder how many of you have ever heard of Maxwell Woosnam?

Born in Liverpool in 1892, Max is often referred to as the 'Greatest British sportsman' in recognition of his achievements.

It is a fair statement as Max was exceptionally talented at various disciplines.

Not only did he win gold and silver in tennis in the 1920 Olympics, he also won the doubles at Wimbledon, hit a maximum 147 break in snooker and made a century at Lord’s cricket ground.

He was also a footballer – first at Chelsea, before captaining Manchester City and the England national team.

All that while being a heavy smoker.

A table tennis pioneer, he famously beat Charlie Chaplin using a butter knife instead of a bat – that’s some going.

I am not sure the modern-day sportsman like Andy Murray, Anthony Joshua and Lewis Hamilton can compete with Max when it comes to his all-round sporting capabilities.

This week’s Best in Class is a fund which I think can lay claim to being one of the best all-rounders in the IA UK All Companies sector.

The Investec UK Alpha fund is managed by Simon Brazier at Ninety One, which recently demerged from Investec.

Mr Brazier is also co-head of the Ninety One's Quality team which ably supports this portfolio.

Simon joined Investec in 2015 from Columbia Threadneedle, where he was head of UK  equities.

The fund is very much style agnostic and does not invest based on a single investment theme, growth driver or market-cap, giving it the flexibility to outperform.

The process essentially looks for companies with strong business models,

The 50-90 stock portfolio is well diversified and Mr Brazier's main ethos behind the fund is that markets are inefficient, which comes primarily from stocks being mis-priced over a three to five-year view.

His aim is to find out what a company is truly worth in that period and then buy low and sell high relative to that valuation.

The majority of the portfolio will be invested in companies with attractive quality characteristics in terms of business model, financial model and management.

The strategy will, however, also seek to exploit restructuring/recovery opportunities, shorter term cyclical opportunities and contrarian or ‘hidden gem’ opportunities, provided there is strong valuation support.

The process works in three stages: idea generation, fundamental research and analysis, and portfolio construction.

Stocks are filtered using a qualitative approach that leverages the team’s experience and the variety of inputs available such as company meetings, and internal and external research.

The process essentially looks for companies with strong business models, with a competitive advantage, sustainability and long-term profit growth.

Mr Brazier also looks for companies that turn their profits into cash.

Balance sheet strength, the quality of earnings/accounting and cashflow conversion are also important.

The third element is the one he feels is often overlooked, which is capital allocation.

He wants to see capital being allocated efficiently and in alignment with shareholder interests.

The ideal scenario would be a company which can not only return cash, through share buybacks and dividends – but also continue to invest in their business.

The fund will not invest in companies that do not return any capital to shareholders.

Mr Brazier is also focused on the risk within the fund.

This means globally diversified, cash generative businesses will be a larger part of the portfolio - with at least 50 per cent of its holdings in the FTSE 100.

Cyclicals and retailers, for example, are likely to have smaller positions, purely because they take more risk.

The fund has returned 14.4 per cent  in the past five years, compared to 11.7 per cent for the IA UK All Companies sector and 9.8 per cent for the FTSE All-Share.

It also has a yield of 2.4 per cent and has an ongoing charges figure of 0.82 per cent

This is a strong candidate for a core UK holding. Its flexibility allows it to adapt to any market conditions and is back by an experienced manager and a capable team.

Darius McDermott is managing director of FundCalibre