When it comes to picking a passive or an active fund, we usually side with the former. Passive funds are generally cheaper, as they just follow a market index. Active funds, on the other hand, may try to beat the market, but many fail to do so and are therefore not worth the extra expense. However, there are a few exceptions.
The Schroder UK Alpha Plus Fund is one of them, says Mark Dampier at Hargreaves Lansdown. This fund is the “very antithesis of a tracker”. That’s because it is “completely divorced from following any benchmark”, leaving manager Richard Buxton free to pick any stocks he likes.
As a result, the fund has outperformed the FTSE All Share index by around 119% since its launch in 2002 – “proof that active fund management can be well worth paying for”.
Buxton is bullish for 2011: he believes that on an earnings basis shares are far better value than they were ten years ago. This comes through in his stock selection.
For example, he is backing British Airways despite the problems it’s faced in recent years. He believes the merger with Iberia will boost the shares. “None of the benefits of the merger in cost and revenue synergies through co-ordinated routing are yet reflected in valuations. We’re confident there is still material upside in the shares,” he told Investment Week. He has also recently added publishing group Reed Elsevier to his portfolio. It should generate “steady growth” now a new CEO is in charge and a share placing will strengthen the balance sheet.
He’s confident stockmarkets can power past worries about currency wars, policy tightening in Asia and the European sovereign crisis.
Contact: 0800-718777.
Schroder UK Alpha Plus Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| Lloyds Banking Group | 4.3 |
| Xstrata | 4.0 |
| Misys | 3.9 |
| Rio Tinto | 3.8 |
| Royal Dutch Shell B | 3.6 |
| Standard Chartered | 3.4 |
| BG Group | 3.4 |
| Virgin Media | 3.4 |
| BHP Billiton | 3.4 |
| British Airways | 3.2 |