IFSL Evenlode Income

IFSL Evenlode Income is a highly concentrated portfolio of quality UK companies. Managers Hugh Yarrow and Ben Peters believe the market fundamentally underestimates the value of high-quality businesses because of its obsession with short-term factors. As a result, they aim to take a much longer investment view in IFSL Evenlode Income than is typical of most funds today.

Previously WS Evenlode Income

Our opinion

The managers are not afraid to radically depart from their benchmark and ignore entire sectors in this fund. The investment process is extremely well defined and is based on the simple, but effective, idea that over the long run quality will outperform. This high conviction, long-term approach is refreshing to see. IFSL Evenlode Income’s universe is relatively small, although this is somewhat mitigated by the managers investing in some overseas stocks.

Fund manager

Hugh Yarrow, the lead manager, graduated from Edinburgh University with a first class degree in philosophy and mathematics. After managing equity income funds for Rathbones for seven years, he joined Wise Group in 2009 and launched the Evenlode Income fund in October of the same year.

Co-manager, Ben Peters, has been an analyst on Evenlode Income since its launch and became co-manager in 2012. He gained an MSc in theoretical physics from Imperial College London, as well as a Doctorate of Philosophy in nano electronics from the University of Oxford. In 2017, Ben was made CEO of Evenlode Investments, which is part of the Wise Group.

Evenlode is named after the local Oxfordshire river. As the name suggests, we like all the holdings in the portfolio to contribute to a healthy, growing, free cash flow stream over time.

Hugh YarrowFund manager

Investment process

Evenlode Income is highly concentrated, with between 30-50 stocks, and with its top ten holdings making up around 55% of the portfolio.

Hugh and Ben invest only in high quality, cash-generative businesses. They avoid those with high capital expenditure, such as miners or oil and gas producers.

Their proprietary research and portfolio management software system, “Eddie”, helps the team identify compelling valuation opportunities, which the managers will discuss in their weekly investment team meetings. Eddie is also used as part of the ongoing, daily portfolio management and research process.

The managers then look in more detail at companies to identify if they have hard to replicate business models, intangible assets, and high barriers to entry, in sectors where they consider the likelihood of substitution risk and disruptive technology to be low, and in which customers buy the product based on its perceived value to them, rather than on the production cost.

Once a suitable stock has been identified, detailed research and analysis of the business will take place, including looking at strategy and earnings reports, buyer/supplier analysis and even speaking to ex-employees to get an all-round view of the company. The fund managers will meet company management to understand their long-term strategy and their approach to risk management.

Each holding should also have an attractive, well covered dividend yield in order for the fund to fulfil its income mandate.

ESG

ESG - Integrated
Evenlode regards environmental, social and governance considerations as an integral part of the investment philosophy, and the investment team engages actively with the companies in which the fund is invested. The team believes that the consideration of ESG factors in the investment process can help to sustain and improve returns, whilst also having the potential to create a positive impact in the economy and society.

Evenlode considers integrating ESG factors into the mainstream analysis as a means to create a more robust risk management framework, allowing managers to consider all the risks a company faces - financial and non-financial. This gives them a more holistic view of the business, and they can manage risk accordingly. Evenlode believes that the more risks identified and managed, the higher the chance there is of making a positive impact on investment returns. When conducting the initial analysis of a stock, before it is added to the investable universe, considerations such as the long-term industry outlook, management quality, company culture and the company’s social impact (negative or positive) are all taken into consideration.

Risk

The managers reduce volatility by investing in high quality, defensive businesses. These businesses’ revenue streams are extremely well diversified, helping to reduce any stock-specific risk. Regular risk management meetings are held to ensure all key risk factors are considered. We expect IFSL Evenlode Income to outperform in down markets and underperform in a strongly rising market.

See more

Read more about this fund

The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.