Growth vs value: how much are you willing to pay?
On the whole, I don’t think lockdown has been too difficult for us – and it’s certainly been...
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
This fund launched in September 2018 and will be similar to the previously Elite Rated L&G UK Special Situations fund, which the manager ran from 1 May 2014 until 31 December 2017. Over that time the fund returned 51.53%* compared with a sector average return of 32.38%*. We have known Richard Penny for a long time and believe him to be a very talented stock-picker. We think the new fund has the potential to be very good.
*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.
Company description
CRUX Asset Management is an employee-owned asset management business. It was established in 2014 by Richard Pease and James Milne, both previously of Henderson (now Janus Henderson). Each of the fund managers invest their own money in the funds they run, co-investing along side their clients.
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.
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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