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Rathbone merges funds to make recovery

Rathbone Unit Trust Managers has created the Rathbone recovery fund by merging its smaller companies and special situations funds.

RUTM wanted to create a fund that was appropriate for market conditions going forward and doing this by merging the existing funds made economic sense.

The new fund will aim for growth by investing in 50 to 60 stocks of companies with recovery potential that is not recognised by the market. These stocks will be sold when this potential is recognised.

Stock selection will involve looking at the reasons why share prices have fallen, then identifying a catalyst capable of triggering and sustaining a share price recovery. Recovery situations may be brought about by the economy picking up, industrial cycles, stock specific issues such as management changes or changes in the business models and investor perceptions.

Qualitative analysis of balance sheet strength, quality of management and products, competitive advantage and barriers to entry will be used to select stocks. This is combined with the use quant screens to determine the valuation that should be set for each stock. Risk assessment is also important in the construction of the portfolio and a stock will not be included if it upsets the overall balance of the fund.

The fund has the flexibility to invest in UK companies of all size and up to 20 per cent in European shares. It will be managed by chief investment officer Julian Chillingworth and investment manager Marina Bond, with input on the European side from assistant fund manager Alan Dobie.

Dobie joined Rathbones in 2005 from university and is responsible for European stock and sector analysis on all Rathbone funds. Bond joined RUTM in 2000 from university and previously managed the Rathbone smaller companies fund.

Chillingworth has almost 30 years’ investment experience with companies such as Investec, James Capel, GAM and Bankers Trust. He joined Rathbones in 2001 from Investec, where he was head of UK balanced funds and head of UK equities. He manages the Rathbone blue chip income and growth fund and co-manages the company’s ethical bond fund.

Rathbones is best known among IFAs for its income fund, which has suffered during the global financial crisis. A recovery fund adds another strong to its bow but it may face competition from funds such as the long-running M&G recovery fund, Artemis UK special situations and Standard Life’s UK equity recovery fund.


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