FE Alpha Manager Russon, who was with Newton until earlier this year, has been working on the portfolio since April, and will take over the lead role from June.
According to the highly rated pair, major changes are already underway to overhaul the fund.
Russon says he is now running the fund as a "best ideas" portfolio, encompassing ideas from Franklin Templeton’s small, mid and large cap oriented portfolios, though with a large cap tilt.
From when he arrived in April to the end of May, the fund shifted from holding 66 per cent in the FTSE 100 to 74.7 per cent, while its FTSE 250 holdings have been scaled back from just over 30 per cent of the fund to 19.6 per cent.
Earlier this week, Russon and Hall’s FE Alpha Manager colleague Paul Spencer told FE Trustnet that he thought the outperformance of the mid cap sector was going to weaken in the coming months.
Russon has also slightly increased the cash weighting of the portfolio from 0.9 per cent to 2.9 per cent, and has narrowed its focus to fewer than 50 stocks, reflecting his high-conviction style.
The portfolio was previously comprised of 66 holdings and currently sits at 44; however, Russon says many of the previous asset and sector weightings have remained consistent after the shift.
In addition, no holdings in the portfolio will have a weighting of less than 1.5 per cent.
Russon says he has a lot of flexibility in what he wants to invest in because the fund is not constrained by a particular market cap.
"Running money in an unconstrained manner is obviously just starting with a blank piece of paper and saying which companies I want to hold," Russon said.
The fund is a buy-and-hold strategy for long-term investors and aims to achieve a total return exceeding that of the FTSE All Share.
"Recognising when to take the hard decision [and sell] is one of the most difficult things to do in fund management," Russon said.
While the portfolio has undergone several changes, the team says that many of the names that were already in the fund are consistent with Russon’s approach, and he adds that Hall will "remain a key component of the investment team for the Franklin UK Select Growth fund and the wider product suite".
The £104m fund has outperformed the IMA UK All Companies sector and FTSE All Share over three and 10 years, but underperformed over one and five, according to FE Analytics.
Over the last decade, the fund has made 177.04 per cent while the sector and index have gained 146.73 per cent and 156.15 per cent respectively.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
After seeing strong outperformance in 2004, 2005 and 2006 the fund began to lag its peers, taking hits in both 2007 and 2008.
While it has remained in positive territory since – apart from the down markets of 2011 – the fund has lagged its peers in the rally, returning just 9.86 per cent in 2012 compared with 12.3 per cent from the index and 15.05 per cent from the sector average.
It has a yield of 1.45 per cent.
Year-on-year performance of fund vs sector and index over 10yrs
| Name | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | 2007 (%) | 2006 (%) | 2005 (%) | 2004 (%) | 2003 (%) |
|---|---|---|---|---|---|---|---|---|---|---|
| Franklin UK Select Growth | 9.86 | -4.49 | 15.14 | 29.03 | -32.43 | -0.7 | 21.99 | 26.74 | 23.22 | 20.86 |
| IMA UK All Companies | 15.05 | -7.04 | 17.53 | 30.4 | -31.96 | 1.85 | 17.38 | 20.86 | 12.68 | 21.84 |
| FTSE All Share | 12.3 | -3.46 | 14.51 | 30.12 | -29.93 | 5.32 | 16.75 | 22.04 | 12.84 | 20.86 |
Source: FE Analytics
Among the fund’s top holdings are UK tobacco giants British America Tobacco and Imperial Tobacco Group, both of which are also major constituents in Colin Morton's four crown-rated Franklin UK Equity Income fund.
The managers are also backing Ashtead Group which is held by Spencer in his four crown-rated Franklin UK Mid Cap portfolio.
Russon managed the Newton UK Opportunities fund from July 2005 to February this year.
Over that period, the fund delivered solidly top-quartile returns, beating both the IMA UK All Companies sector and FTSE All Share.
Performance of fund vs sector and index during tenure
Source: FE Analytics
Franklin Templeton UK Select Growth requires a minimum investment of £1,000 and has ongoing charges of 1.59 per cent.
