BMO Global Asset Management’s Thomas Wilson has overhauled the firm’s UK Alpha fund since taking over the running of the vehicle at the start of this year.
Mr Wilson was appointed lead manager on the £67.5m portfolio following a period of dire performance by previous manager Peter Lees.
The manager has since changed around 85 per cent of the fund’s holdings, in the process regaining ground it had lost to its peers and benchmark.
The vehicle has underperformed in the past three years, delivering 12.1 per cent against the Investment Association UK All Companies sector’s average return of 33.4 per cent and the 22 per cent rise in the FTSE All-Share index, data from FE Analytics shows.
The fund had been in the bottom quartile across three and five years, according to discrete performance figures.
However, it has now jumped to the second quartile for the past 12 months and year to date following Mr Wilson’s intervention, though the rapid overhaul meant he had to “take a bit of pain” selling some of the worst stocks.
He said: “We are almost entirely through that now and the performance has picked up substantially.”
The fund has almost caught up with its peers, returning 1.2 per cent so far this year compared with the sector’s 1.6 per cent, according to FE Analytics.
He said: “We’ve brought it in line with the pan-European philosophy and made it a high-conviction fund. I’ve tried to fill it with the team’s best ideas.”
Mr Wilson plans to have between 30 and 40 stocks in the portfolio with a mid-cap bias, which he thought was the “sweet spot of the market”.
This ties in with the manager’s past experience – he has worked on the £30m F&C UK Mid-Cap fund since 2009 and took over as lead manager in April this year.
Since then he has disposed of one stock on the portfolio and bought two others.
He ditched multi-disciplinary international consultancy RPS Group, and in its place bought Avon Rubber – which produces rubber-based products for the manufacturing sector – and home furnishings retailer Dunelm Group.
“We are very much cash focused and we have concerns about underlying cash generation over capital allocation,” Mr Wilson said on dropping stocks.
He said this portfolio maintained 40 positions, with a “one in and one out” philosophy but with one exception.
Healthcare market research firm Synergy Healthcare was divested and has not been replaced. The stock – which the manager said was pricing in margins it never had and a valuation it never achieved – was bid for by US company Steris.
Mr Wilson said it had been difficult to find a high-quality replacement when he ditched the stock, and was therefore waiting for an appropriate opportunity.
