We have moved the Ninety One UK Special Situations fund to our Recommended list.  The fund previously featured on our Positive Watch list.

Fund Snapshot

A contrarian UK equity fund that is managed according to a value strategy.  Philosophically, the managers look to understand why conventional wisdom may be wrong, in doing so seeking to invest in companies that are priced at a significant discount to their true worth.  Within its sector, the fund features in our ‘Value-Biased’ category.

Fund Description – key points

• This Recommended fund is co-managed by Alessandro Dicorrado and Steve Woolley, who are experienced members of the Value team. They worked very closely with the previous manager and architect of the approach, Alastair Mundy.
• Messrs Dicorrado and Woolley have worked together for several years and have managed a global strategy according to the team’s value approach since 2016.
• Their focus is the identification of inexpensive and out-of-favour companies which also have suitably robust balance sheets. Significant fundamental analysis is undertaken, with the company viewed through the lens of enterprise value, rather than market capitalisation, to ensure that all liabilities are accounted for.
• The managers are committed to value investing and we admire their dedication to the contrarian cause.  They possess the key attributes of patience and resilience, essential for managers who operate in this often-challenging investment sphere.

Characteristics and Utility

• Style wise, the fund resides firmly in the value camp.  The managers aim to be highly rational when those around are being irrational and are willing to head towards perceived danger when they believe the risk/reward prospects are skewed in their favour.
• This approach often leads them to initiate investments at an early stage, and, by the same token, to sell them early.  This contributes to a risk/return profile that is clearly differentiated from many peers.
• That said, their approach also emphasises safety of principal and they exercise caution in respect of their valuation assessments in case their investment thesis does not come to pass.  They tend to be less tolerant of serial underperformers and are alert to the risk of value traps.
• The deep value, contrarian style can lead to periods of fallow relative performance, particularly at times when stocks are re-rating in the absence of improving fundamentals.  In such circumstances, the managers’ caution prevails.  On the other side of the coin, the fund can also enjoy bursts of very strong relative performance.
• The fund is suited to investors with a long-term mindset who can tolerate the idiosyncratic nature of the risk/return profile.  For investors who are concerned about shorter-term outcomes versus the benchmark, the fund should be blended with a growth-biased fund or treated as a differentiated satellite position.

To view our full factsheet, please visit the fund page.