Investec UK Special Situations fund

Sheridan Admans, investment adviser at The Share Centre, explains how investors looking for a combination of income and long-term capital growth could benefit from the Investec UK Special Situations fund.

"Unlike many funds which seek to invest in popular shares, this fund actually seeks to identify those that appear to be out of favour with the market for unique reasons. These shares could be considered as undervalued when compared to market consensus, but each one is expected to come back into favour in its own cycle, thus there is a potential for smoother returns over the long-term.

"The fund aims to provide a combination of income and long-term capital growth, primarily through the application of a contrarian approach to investment in UK equities and in derivatives, the underlying assets of which are UK equities.

"Alistair Mundy is responsible for the management of this fund and heads the Investec Asset Management's Contrarian team, one of the largest UK equity contrarian teams in the market. Mundy ensures that the contrarian philosophy is consistently applied to all share purchase decisions and that risk is appropriately diversified.

"The range of securities available is filtered by first passing those companies with a market capitalisation above £100m, which helps to highlight the poorest performing shares. The fund still looks for good underlying fundamental values such as the company's assets, current cashflows or profits.

"Over the last year the fund has outperformed its benchmark ‘IMA UK All Companies' by 22.65 per cent. In fact, the consistency of the fund's performance is even more impressive, having delivered 1st quartile performance over the last 1, 3, 5 and 10 years. The Investec UK Special Situations fund is rated ‘AA' by OBSR and has an ‘Elite' Morningstar Qualitative Rating.

"The fund is suitable for investors looking for additional UK exposure within a fund that would complement a mainstream blue chip UK equity fund. By undertaking a contrarian approach to investing, investors should appreciate that the fund may have periods of underperformance when compared to a more mainstream UK equity fund."