VT Downing Unique Opportunities

Launched in 2020, this is a multi-cap UK equity fund run by the highly-experienced Rosemary Banyard. Rosemary has spent more than 30 years in the investment industry, as both an analyst and a fund manager, and has a well-defined process looking for companies that have sustained competitive advantages, with low debt and good management teams. The final portfolio will be highly concentrated at 25-40 names.

Our opinion

Rosemary has been a low key industry success story: she has successfully run a variety of UK funds over the past 20 years or so and this new launch is the culmination of her investment experience. Her edge comes from her ability to look beyond the 1-2 year period the broking community focuses on to forecast returns and we see no reason why she cannot replicate her previous successes with this new fund.

Fund manager

Rosemary started her illustrious career in the City as a broker after she graduated from Cambridge University. She later became a fund manager and was approached by Schroders in 1997 to replace the departing Anthony Cross, now of Liontrust. Rosemary remained at Schroders for 18 years, as co-manager of the Schroder UK Smaller Companies fund and lead manager of the Schroder Mid Cap fund. In 2016, Rosemary left to join Sanford DeLand and, in March 2020, she joined Downing to launch the VT Downing Unique Opportunities fund.

Ignore the daily stock market noise, just focus on finding some excellent businesses at a fair price and let them get on with it.

Rosemary BanyardFund manager

Investment process

Rosemary’s approach to analysing a stock is to act as if she is buying the whole company - therefore she will look for long-term success rather than short-term gains. The Unique Opportunities title of this fund refers to those characteristics of a company which will enable it to produce sustainable, above-average returns. This might be in the form of intangible assets, such as patents or strong brands; cost advantages due to better processes or scale; a leading network or high switching costs for existing customers.

These companies tend to have easy to understand business models, which allow for accuracy in forecasting success and good management teams who are able to grow the company organically or, if by acquisition, with good discipline.

With around 3000 companies in the universe, Rosemary starts with a screen to remove those that aren’t going to fit her model. She is willing to consider a few names that may have just fallen short of the screen, but which she knows from her many years investing. The resulting shortlist will then be subject to Rosemary’s proprietary model analysis and valuation.

Rosemary will conduct a three year cash-flow forecast. This will provide a target price for a stock. If the current price is below this, she will initiate a purchase. Preference is given to how much of a margin of safety there is in the valuation, and the long-term view of the company.

If the portfolio is fully invested, Rosemary will sell stocks to buy better ones. She will also sell a stock if the story changes, the pace of acceleration changes or if the previously good metrics deteriorate without good reason.

ESG

ESG - Integrated
Downing puts ESG considerations at the core of its approach, with the purpose of enhancing returns. As this fund is a high conviction portfolio, it is imperative to identify all risks, including those that arise from ESG issues. Equally, the number of challenges to society posed by ESG issues leads to opportunities for the fund, so the philosophy leads to a strong ESG profile regardless.

The search for sustainable business models means Rosemary generally avoids contentious areas such as gambling, mining and oil and gas companies. Once she has identified these quality companies, they are run through a third-party data provider to create ESG scores. Rather than a negative screen, this is used to identify potential issues, and create a basis for future engagement. One of the key differentiators Rosemary looks for is quality management teams, and their history. This includes looking at their previous track records on approaches such as accounting policies or governance approaches. Her extensive experience helps here, as she knows many of the people involved and how they have behaved previously.

Risk

The fund will be very focused with just 25-40 names and therefore relies on Rosemary picking the right investments. Very small and very large companies are generally avoided.

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