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Skandia UK Best Ideas Fund continues restructure

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The restructuring of the Skandia UK Best Ideas Fund is continuing, with the focus of the fund now on six high conviction managers.

The fund underwent a fundamental restructuring in early February when it was announced that three managers were dropped following disappointing relative performance from the fund when markets rose strongly last year.

As part of that review it was also decided to drop George Luckraft of Axa Framlington to concentrate on the six remaining managers – all of whom have successfully demonstrated their skills in generating sustainable focused alpha in a highly volatile market environment.

Luckraft remained in the team of seven managers, but with a portfolio consisting of less than five per cent of the fund, primarily because his relatively illiquid assets needed to be liquidated in an orderly manner.

Skandia Investment Group has now achieved an orderly unwinding of the Luckraft portfolio and has announced the new shape of the fund. The restructuring of the portfolio is now paying off as the fund has begun to outperform its peers: as at 28 June, according to Lipper Hindsight, the fund is up 2.4 per cent year to date, outperforming the IMA All Companies sector which is down 2.3 per cent. The fund is also outperforming the IMA All Companies sector over 12 months, having returned 24.1 per cent compared to the sector’s gain of 23.3 per cent.

SIG portfolio manager François Zagamé says: “We reached the conclusion that the fund should focus solely on managers who had displayed evidence of ‘sustainable focused alpha’ by consistently outperforming their diversified funds with their best ideas portfolios during the very testing market conditions of 2008 and 2009. Our review of the fund also led us to conclude that George’s expertise as a fundamental investor in UK small and mid caps, which can be relatively illiquid in volatile markets, was not suited to the fund and the conditions we face and therefore we decided to liquidate his portfolio and concentrate on the six remaining managers.

“One of the key characteristics displayed by most remaining managers is an ability to adapt very quickly to changing market conditions, which has been clearly demonstrated in the recent market turmoil. This pragmatism is something we view as important given the volatile nature of stock markets.”

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