Becket (pictured), chief investment officer at Psigma and manager of the group's Dynamic Multi Asset fund, says he took the decision to buy the £158m vehicle to make the most of the attractive valuations found in the equity market at the time. Although it has been a volatile holding, R&M UK Equity Long Term Recovery has been one of his best performers since then.
"We initially bought the fund in November 2008," he said. "We identified, after running a materially defensive portfolio, that equities were looking very attractive."
"The immediate retort was that buying the fund made us look very clever as it performed well over the first month as equities witnessed a small rebound, but fell away over the following months."
"Nevertheless, the fund continued to perform well in to 2009 and beyond."
The £157.9m R&M UK Equity Long Term Recovery fund has been managed by Hugh Sergeant since its launch in July 2008.
According to FE Analytics, since Becket bought the fund it has been a top-quartile performer in the IMA UK All Companies sector, with returns of 128.27 per cent, beating its benchmark – the FTSE All Share – by more than 40 percentage points.
Performance of fund vs sector and index since Nov 2008
Source: FE Analytics
Although the fund has been considerably more volatile than the sector and index over the period, Becket says this is not something to be concerned about.
"It is a high-risk, high-beta fund so it had a disastrous time in 2011, but did well in 2012 and has performed relatively well this year," he explained.
"Within our fund of funds, we never tend to have more than 50 per cent in equities. That means we like to hold equity funds that work hard, so to speak."
In 2009, R&M UK Equity Long Term Recovery was the sixth best-performing fund in the UK All Companies sector, whereas in 2011 it was the fifth-worst performer.
However, Sergeant’s fund returned to the top of the sector in the up year of 2012, and is a top-quartile performer so far this year, with returns of 13.76 per cent.
The fund’s largest sector weighting is to financials, making up 29.3 per cent of the portfolio, and it also has a high degree of exposure to both the consumer services and industrial sectors.
R&M UK Equity Long Term Recovery consists of 163 stocks.
Sergeant counts blue chip banks such as Lloyds, Barclays and RBS as top-10 holdings. The fund’s fourth largest position is in mining giant Rio Tinto.
Becket says he is backing the fund for further outperformance because he believes economically sensitive stocks remain hugely attractive.
"We will continue to hold R&M UK Equity Long Term Recovery because in the current environment defensive, almost bond-proxy equities have become very expensive, while on the flip-side cyclical stocks remain undervalued," he said.
"It seems like people have basically given up on growth going forward, so we feel cyclicals are very attractive and are the best value [they’ve been] since 2008."
"As we only hold 47 per cent in equities, we are never going to keep up with a number of our competitors when markets rally."
"It is investments like the R&M fund that we can use our equity risk budget on to benefit from a rising market," he added.
R&M UK Equity Long Term Recovery currently makes up 2.23 per cent of Becket’s fund. FE Analytics data shows that no funds in the IMA universe hold it in their top 10.
The fund has an ongoing charges figure (OCF) of 1.93 per cent and requires a minimum investment of £1,000.
Looking to the future, Becket points to a very different type of fund – PFS Asset Backed Income – as a potential star in the making.
"It holds asset-backed securities and is a very interesting fund," he said.
"As we all know, there is very little value in the fixed income market, but this fund can pay out a very good yield of 8 per cent from a portfolio of predominantly investment-grade European mortgage-backed securities."
"The fund also has Libor protection, so if interest rates were to be pushed upwards the fund shouldn’t suffer."
"Going forward, we think on a risk-adjusted return basis it is one of the most attractive funds given the yield and opportunity for capital appreciation."
PFS Asset Backed Income is co-managed by the trio of Ben Hayward, Eoin Walsh and Gary Kirk.
The fund was launched in January 2013 and since then it has returned 2.07 per cent while the Libor GBP 3m index has returned 0.15 per cent.
Performance of fund vs index since Jan 2013
Source: FE Analytics
It is Becket’s 10th-largest position, making up 4 per cent of his £20m portfolio. No other fund counts it as a top-10 holding.
PFS Asset Backed Income has an OCF of 0.86 per cent and requires a minimum investment of £1,000.
Becket has managed the £20m Psigma Dynamic Multi Asset fund since its launch in September 2008.
Over this time, the fund has returned 42.8 per cent while the IMA Mixed Investment 40%-85% Shares sector has returned 36.84 per cent.
His fund requires a minimum investment of £10,000 and has an OCF of 2.53 per cent.