A move to ditch a third of the stocks Jamie Lowry and Ian Kelly inherited in their Schroders global equity fund has hauled it up the sector rankings.
The duo took the group’s £108m Global Equity Income fund on from Sonja Laud in November 2013, after the manager left the group.
Ms Laud ran the fund from its launch in May 2007 and during her tenure delivered a third-quartile return in the global equity income peer group, according to data from FE Analytics.
However, since Messrs Lowry and Kelly have been running the vehicle, it has been the second best performing fund in the sector with a return of 17.5 per cent, only trailing Artemis’s Jacob de Tusch-Lec.
The duo significantly reduced the number of holdings in the fund, taking them from 75 to fewer than 50.
Mr Lowry said this had given the fund greater conviction and made it more aligned with their value-based process, which sought to determine undervalued companies overlooked by others.
“In no way did we decide to reposition the fund with the expectation it was going to perform well in the first year,” he explained.
That said, Mr Lowry added that any uptick in returns over the past 12 months would likely continue.
“Those that did do well last year, we hope they would do even better over the next three to five years,” he added.
Mr Lowry said the fund did not currently have a particular theme or sector it was playing more than another because the managers work by identifying companies in a bottom-up process.
At the stock level, his largest holding is Ageas, which he called “one of, if not the best-capitalised insurance companies in Europe”.
The top contributor last year was Staples, the stationery seller, which recently confirmed it had reached agreement to take over rival Office Depot, creating the largest office supplier in the US, provided the deal completes.
Mr Lowry said Staples was the second-largest internet retailer in North America behind Amazon and was expected to go through a serious transition morphing into an online business.
A holding Mr Lowry said typified his process by unearthing a “hidden gem where people are not looking” was Graham Holdings, formerly The Washington Post Company.
The second-biggest contributor to the fund’s returns last year, Graham Holdings is a provider of educational services, broadcasting, cable systems and multimedia news, which caught the Schroders team’s eye after it sold off its loss-making flagship brand The Washington Post to Jeff Bezos, Amazon’s chief executive.
Elsewhere, while he said companies in the Greek market had become cheaper amid a rising debate about the country’s relationship with the European Union, he said stocks were not cheap enough yet.
“A lot of the major enterprises are still not cheap enough, given the risks you are running as an investor in Greece,” he said.
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