Bestinvest says
Whilst the investment process has merit we believe the approach leads to a reasonably close alignment with the fund's benchmark Index. This is fine when a passive/tracker fee is charged, but not as in this instance when investors are paying a higher fee than they would expect to pay for a more actively managed fund. Those investors seeking full active management should consider one of our recommended funds within the UK All Companies sector.
The fund aims to achieve capital growth over the long term by investing in UK large capitalised stocks. The portfolio is narrowed down using the in house quants screen, TMV (Trends, Momentum & Value) which looks at three different factors. The value of stocks based on different price ratios, specifically one-year forward earnings (P/E multiple); Earnings revisions (broker upgrades or downgrades) on a 3 month basis as the managers believe investors tend to react to good and bad news on companies, resulting in a strong correlation between earnings revision and share price performance and Momentum as their analysis shows that stocks tend to out perform for extended periods.
Once the team has a manageable list of interesting large cap stocks to analyse they are subsequently rated 1-5 and tracked, the most attractive are then investigated by the research team to verify the results.
The portfolio construction centres around using this bottom-up process to identify areas of the market that the managers believe are cheap. The aim is to buy as many large cap stocks as possible without diluting the performance characteristics that they are targeting. Whilst this helps to diversify risk it means that bets relative to the benchmark are relatively small.