TM CRUX UK Special Situations

TM CRUX UK Special Situations invests in UK companies of all sizes, but will typically have more of a focus on medium and smaller companies than many of its peers. In addition, there will be some FTSE 100 names and a few carefully chosen AIM-listed companies in a concentrated portfolio of around 40 holdings.

Our opinion

Richard is a veteran with well over 20 years experience of managing UK funds. We've known Richard for a very long time and believe him to be a very talented stock-picker. He has a level of experience investing right across the UK market cap spectrum which few others can match. We like his pragmatism and ability to generate new investment ideas. The fund has performed well since its launch in October 2018 and we believe he can continue to deliver in the future.

*Source: FE Analytics, total returns in sterling for L&G UK Special Situations Trust and the IA UK All Companies sector, 1 May 2014 to 31 December 2017.

Fund manager

Richard joined CRUX Asset Management in June 2018 from Legal & General Investment Management (LGIM). Richard had worked at LGIM for 15 years and managed previously Elite Rated L&G UK Alpha Trust and L&G UK Special Situations Trust, as well as several segregated mandates. He has also worked at M&G Investment Management and Scottish Amicable Investment Management. Richard has a master’s degree in Engineering and Economics from Oxford University.

I have always believed that good businesses only make the right investments when they are bought at the right price.

Richard PennyFund manager

Investment process

Richard is, by his own confession, a tight-fisted Yorkshireman when it comes to his investments. He likes to find a bargain, and over his career, has proven himself very able to do so. He looks for high quality businesses with low levels of debt. He likes them to be run by strong management teams and for the business to have an economic advantage and the potential for high returns on capital and growth. Companies tend to fall into two categories: rising stars and fallen angels. Rising stars are quality companies that are growing and have high returns on cash, but whose shares are undervalued in Richard's view. Fallen angels are the very cheapest shares in the market: the big price fallers and recovery companies, where there is hidden value and discarded quality.

ESG

ESG - Limited
When looking for his stock ideas, Richard wants to keep an open mind about potential investments, and therefore has no formal ESG constraints on the fund. However, he does consider ESG factors when looking at companies. He generally avoids firms involved in tobacco and armaments, due to the controversial nature of their business, and has a tilt in the fund towards technology and healthcare names which are often drivers of improved social performance. Meeting management teams is a foundation of the process, and he will use this to engage with firms on issues he has identified as problematic.

Risk

The fund is concentrated in around 40 names, so there is notable single stock risk. That said, Richard considers all the risks for a stock when deciding how much to buy. This goes some way to mitigating the risks at an individual company level. The fund can, and will, invest in smaller- and medium-sized stocks, which can also increase risk. Richard has moved from a very big company to a small boutique and we are watching to see if this has any impact on his approach.

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