The real Crux of the matter... solid returns

INVESTMENT fund Crux UK will from tomorrow be renamed Crux UK Core. Although nothing will change in how it is managed, the London-based investment house Crux Asset Management hopes the relabelling will help emphasise the fund’s dependability as a provider of capital and income return from the UK stock market.

The fund, run by Jamie Ward, certainly has a solid performance record. Over the past five years, it has outperformed both the FTSE All-Share and the average return recorded by its immediate peers – in the process delivering an overall return of 47 per cent. It also pays an income – albeit a small one – twice a year, equivalent to about 1.3 per cent.

Ward currently invests in only 26 companies, but his mantra is a conservative one, built on doing all he can to preserve investors’ capital and then looking at ways of enhancing it. He says: ‘I’m looking to invest in high quality businesses that I believe will create value for investors and are sustainable. They also need to be well managed.’

The result is a portfolio comprising household names – such as Barclays, BP, British American Tobacco, HSBC and soap manufacturer PZ Cussons. Apart from a couple of overseas holdings in bank JP Morgan and Goldman Sachs – the fund is allowed to hold 15 per cent of its assets overseas – most of its investments are listed on either the FTSE 100 or FTSE250 markets.

It holds no unquoted stocks and liquidity is not an issue. Ward says the portfolio, skewed towards companies with market capitalisations of £5billion or more, could be sold down in a morning if the need ever occurred.

The fund, says Ward, is protected from the worst excesses of Labour’s manifesto, although he describes a Labour victory at the polls next month as a ‘high impact, low probability event’. So the fund has no holdings in utility companies that would be renationalised under Labour while the 26 companies held within the fund generate more of their revenues from the Americas (US, Canada and

South America) than the UK.

Although the portfolio is concentrated, Ward ensures no individual holding dominates. It means the biggest stake – in Barclays bank – represents less than six per cent of the fund’s assets.

He is also not frightened to crystallise gains – or losses. So this year, he has disposed of American bank Wells Fargo because of its failure to shake off a fraud scandal. He has also sold stakes in pub group Greene King (at a loss) and distribution company Bunzl.

Ward also likes to have stakes that offset each other, thereby lowering the fund’s overall risk. For example, the share price of product-testing company Intertek tends to perform strongly when oil prices are rising – a result of more products being available for the company to test. This acts as a counterpoint to other portfolio holdings that are usually adversely impacted by rising oil prices because of higher raw material costs.

Crux UK Core is one of six funds that asset manager Crux currently manages. At

£66 million, it is a minnow compared to the company’s flagship fund Crux European Special Situations that has assets of £1.6billion, but Ward is confident its strong performance will attract investor interest once ‘certainty’ returns to the UK stock market. The fund’s annual charges are reasonable at 0.99 per cent.