Seasoned UK equity investor Richard Buxton has taken the helm at Merian UK Equity, but Morningstar fund analysts are reserving their endorsement to see how the star fund manager adapts to the new mandate.
This change of manager and lack of track record means the fund holds a Morningstar Analyst Rating of Neutral, having previously been rated Bronze. Analysts await to see how the incumbent shapes the remit.
Richard Buxton assumed responsibility for this fund on January 1 2019, replacing Simon Murphy who departed after a decade at the helm. Buxton is a seasoned manager with over 30 years of investment experience. On top of his responsibilities as manager of the Merian UK Alpha fund, he had a dual role as CEO.
This lasted three and a half years; he recently handed over this responsibility to concentrate on fund management. There is close collaboration with his colleagues Errol Francis and Ed Meier in terms of monitoring news flow and day-to-day trading. They have been influential for a number of years, the three of them have successfully worked together for over 10 years, and further support is provided by the rest of the UK team.
Buxton uses a process that is established and proven, combining stock-level analysis with top-down insights. He is a patient investor, taking a long-term approach to identifying undervalued firms and often incorporating a contrarian angle to his stock selection.
Buxton is looking to bring his process from the Merian UK Alpha fund to this fund. He adopts a long-term, contrarian approach that seeks to avoid short-term trading in favour of investing in companies that appear underpriced relative to their long-term growth prospects. This includes investments in industries or companies undergoing structural change or a turnaround, as well as longer-term growth stories. He mixes top-down and bottom-up analysis in order to select a concentrated, high-conviction portfolio.
Nevertheless, Buxton is prepared to adjust the portfolio where he thinks he is able to benefit from shorter-term market conditions. His approach has typically led to outperformance in rising markets but has lagged in falling markets, and the recent period of relative weakness in 2015-16 serves to emphasise that the approach is only suitable for investors willing to tolerate variable returns in the shorter term.
This fund has an all-cap mandate, with at least 50% invested in large caps and a maximum of 20% in small caps. Given that Buxton is predominantly a large-cap manager, with his UK Alpha fund typically holding around 75% in large caps, this fund is set to be brought in line with his style. It is too early to see how this plays out, reinforcing the Neutral Rating.
