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Luckraft won’t do the splits

Framlington fund manager George Luckraft says he will not split his successful equity income fund in two in the style of Fidelity’s special situations fund.

Luckraft, who has been at Framlington for three years, is understood to have signed a deal tying him in until 2010 when Axa bought the fund boutique in August.

Framlington soft-closed the equity income fund at 658m in February after it grew from 157m at the end of 2003, saying there could be a risk to performance if it got too big.

Luckraft says: “I was concerned I would get to the stage where I was restrained as to what I could do. To keep the fund open would have been sheer corporate greed. We can always take on another slug of money. The obvious thing to do would be to review matters in 2007 although it is too early to say whether we will reopen the fund then.”

Asked whether it might be a better idea to keep the fund open and split it – in the mould of Anthony Bolton’s special situations fund at Fidelity – Luckraft says his talent is effectively split in two by the second fund he runs for Framlington, the monthly income fund. This is up by 76.6 per cent over three years against a sector average of 49.2 per cent.

Luckraft says he expects to be generating strong returns at Framlington for the fore- seeable future and that he “signed very happily” when Axa bought the firm for 176m from HSBC in early August.

He says Framlington’s new owner made a positive decision to buy the business and has a vested interest to see it succeed. He will not say how much he was paid to stay on.

Under the terms of the deal, Framlington’s other star fund managers, Nigel Thomas and Roger Whiteoak, are also understood to be tied in until 2010 and the firm is expected to be rebranded as Axa Framlington.

Luckraft feels there is no evidence that small and mid-cap stocks are running out of steam. He believes that if a stock with good cashflow rises by 10 per cent overnight, the best approach is to buy more of it rather than sell and take gains.

However, he thinks that high levels of consumer debt are likely to affect the UK economy in the next few years and knock domestically oriented stocks. But Luckraft is investing in other areas such as technology and is confident of his ability to buck the trend. Last month, he bought Diageo in the belief that the firm’s shares have underperformed, just before it announced it is to spend 1.4bn on share buybacks.

Of his status as a star fund manager, Luckraft remains reticent. He says: “Coverage in the press helps fund managers to sell their funds. If an IFA’s client has read about George Luckraft in the Sunday papers, it helps, but performance is what counts.”

Hargreaves Lansdown senior analyst Meera Patel says: “To begin with we found it difficult to understand Luckraft’s approach but he is a gifted stockpicker who has built good contacts with external brokers and delivered exceptional performance over the last three years. His numbers are difficult to argue with.”


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