Hargreaves says Artemis UK Special Sits a 'hold'

19 July 2012 | By Gary Jackson

Hargreaves Lansdown has kept a ‘hold’ rating on Derek Stuart’s £974.5m Artemis UK Special Situations fund but declined to return the portfolio to its Wealth 150 list.

The fund was removed from the investment management firm’s ranking of favoured funds in December 2011, owing to concerns that the manager’s stock selection was not adding as significantly to performance as it once had.

In an update on the portfolio, Hargreaves Lansdown investment analyst Rob Morgan says: “Following a good start to the year, the fund has fallen back, meaning that returns are broadly in line with the sector.”

The fund’s latest factsheet shows the portfolio returned 31.2 per cent in the three years to June 29, compared with the 41.8 per cent gain in the IMA UK All Companies sector. Over six months performance has improved, with the fund posting a rise of 4.2 per cent against the peer group’s 4 per cent increase.

Morgan says: “There were some good individual stock performances to note including software firm Microfocus and ITV. A large weighting in the portfolio to food producers and household goods was also beneficial, including Greencore and Unilever.”

However, he adds that the fund’s exposure to financials was “generally a drag” on its performance, even though it owns nothing in banking. The performance of hedge fund manager Man Group and life insurance group Resolution has “disappointed”, the analyst notes, despite Stuart’s belief that both are fundamentally undervalued.

“Although the fund is not on our Wealth 150, we believe Derek Stuart is an experienced manager capable of good performance. In the past he has added significant value for investors, albeit when the fund was smaller and more nimble,” Morgan concludes.

“As the fund has grown in size it has gradually focused more on larger companies; an area where Derek Stuart has been less able to add significant value through stock selection so far. This has continued to be the case recently, so overall we rate the fund a ‘hold’.”

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