SWIP UK equity funds outperform over three years

Scottish Widows Investment Partnership (SWIP) has produced stellar returns across all of its UK equity retail funds over one, two and three years.

The SWIP UK Income, UK Opportunities and Balanced Equity funds have all beaten their performance targets showing three year returns of 20.3%, 19.4% and 18.3% respectively compared to a median of 16% in the UK All Companies sector and 17.9% in the UK Income sector. The remaining five UK equity retail funds, managed by SWIP, are showing first and second quartile performance over one two and three years.

Robert Waugh has begun his fourth year at SWIP heading up a team of twelve UK equity fund managers, all of which have combined fund manager and analyst roles.

Robert Waugh, Head of UK Equities, at SWIP comments: “Harnessing individual flair within a team environment, can produce better results for investors. As a team, we challenge the investment case for each holding; this open and honest debate creates real understanding of the reasoning behind a recommendation.

“For example, based on our in-depth fundamental research, our funds retain an overweight stance in house building stocks Taylor Woodrow and Persimmon. We believe both companies to be well positioned to take advantage of the ongoing under-supply of new housing stock in the UK, which is supportive for both the pricing environment and the view that further consolidation in the industry appears inevitable.”

The SWIP UK Equity team also commissions its own bespoke research on companies to uncover true value where the stock market may not reflect it.

Waugh continues: “We recently commissioned research on Next to find out if the brand was still intact with customers. This uncovered not only that the brand was very much still intact, but its multi-channel retailing approach is working for the company.”

Under this approach, SWIP’s UK Opportunities fund has gone from strength to strength. Managed by David Urch since December 2003, the fund has grown from £33 million to £128 million. David’s added value approach of including stocks across the market spectrum from small cap to large cap has benefited the fund over the past three years and its overweight position in resource stocks such as Venture Production and Xstrata has had a positive impact on performance over 2006.

David Urch comments on the outlook for the SWIP UK Opportunities Fund: “Performance is coming from research based fundamental analysis of companies and this is driving a shift in the fund, over the first half of 2007, away from small and mid cap stocks into the mega caps. We are looking at increasing our weighting in high quality defensive stocks like Unilever and Cadbury, reducing risk and increasing diversification in the fund. We have also changed the fund’s position by moving away from resources and locking in profits from well timed buys such as Kazakhmys and Drax.”

The SWIP UK Income fund managed by, AA Citywire rated, fund manager Richard Dunbar is ranked 5 out of 83 funds in the sector over two years and 13 out of 77 funds over three years. The fund has benefited from bid stocks such as BAA and McCarthy & Stone in 2006 and long-term holdings in domestic banks such as Northern Rock and RBS have helped the fund produce a steady income.

Richard Dunbar comments on the outlook for the SWIP UK Income Fund: “We still see significant opportunities for the fund in construction and house building stocks and we remain overweight here. For example, plumbing and heating products distributor Wolseley has been doing well as the market has begun to appreciate its spread of assets and growth potential.

“If markets are expected to be volatile but moving up over the year, that’s a good backdrop for financial companies like Tullet Prebon or Close Brothers which we also hold in the fund. These companies are well positioned in the markets they service, are generating cash, and have the ability to grow dividends over time.”