Majedie mulls boosting UK income capacity limit as Wharrier takes reins

Wharrier (pictured) joined the firm from Troy Asset Management in early November to replace Chris Reid, whose departure led to Hargreaves Lansdown removing the Majedie UK Income fund from its Wealth 150.

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The fund is now led by Wharrier alongside existing co-manager Yuri Khodjamirian and fund analysts Mike Totton and Emily Barnard.

Speaking to Investment Week, Majedie CEO Rob Harris said: “We have in place a £1.5bn capacity limit for the UK Income strategy.

“We are going to work on this, but the likelihood is this fund will move slightly higher up the market-cap scale than it has been in the past.

“In which case, there is the possibility we might raise the capacity limit for the strategy.” 

The fund currently stands at £829m in assets, according to FE, but Harris said that the firm is expecting inflows into the strategy “as the Brexit fog clears”.

He added: “Beyond Brexit, there is an opportunity for the UK market, which is very big, very deep and very broad, to become a discrete asset class.

“International investors look at the UK as being part of a
pan-European equity mandate.

“But they will start to separate continental Europe and UK, providing good opportunities.”

 

‘Perfect’ timing

Wharrier, who previously worked alongside Harris at Mercury Asset Management, added his “timing is perfect” with regard to his arrival at the firm, where he will seek to exploit cheap valuations in UK equities.

He explained: “There is a lot of pessimism around and there are a lot of perfectly sound companies you can buy in the UK on price/earnings multiples of up to 12x.

“That was not the case six to 12 months ago, but because the UK has become a sort of pariah state for a lot of international investors, it is a great opportunity to tilt the fund towards some more interesting companies.”

Wharrier added the fund had recently been taking profits from shares in the exploration production sector, which will be used as “a source of cash to recycle into some more interesting areas”.

For potential new positions, he explained the investment team has a list of around 30 companies the “team are familiar with”, which are being analysed “before we pull the trigger”.

Wharrier said these are more domestic-focused with many employing a business-to-business approach, such as the staffing sector, while the team will avoid more consumer-led sectors
like retail.

Under its new leadership, the fund will also seek to use its entire 20% portfolio allowance for non-UK shares and cash, leveraging investment ideas from Majedie’s international fund managers, Wharrier explained.

He added: “The thrust of the fund is not going to change, we may tweak a few things here and there.

“This is about finding companies that are on cheap valuations, where the balance sheet is relatively strong, and where the cashflow of the company has the ability to improve – in an absolute sense
or in terms of the quality of
the cashflow.

“There may be two or three positons we may change before the end of the year. But it is dependent on prices.”

The Majedie UK Income fund has returned 2.4%, 18.3% and 43.3% over one year, three years and five years to 12 November respectively, according to FE. Over the same periods, the IA UK Equity Income sector has averaged -2.8%, 16.9% and 28.8%.

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