T Bailey in second Schroders exit

This is the second big switch out of a Schroders fund that T Bailey has made in recent weeks. Last month the multi-manager sold its £4.4m holding in Schroder UK Mid 250 because of concerns about the amount of money that Andy Brough (picured top) was running. The money was transferred to Old Mutual UK Select Mid Cap.

On this occasion, T Bailey has transferred £4.3m from Schroder UK Alpha Plus to Merrill Lynch UK Dynamic, which is managed by Mark Lyttleton (pictured right).

Jason Britton, co-fund manager at T Bailey, says: “Mark has done a good job since taking over Merrill Lynch UK Dynamic last year. He added value in the summer months while other managers struggled.”

Over the past three months, according to Standard & Poor’s, Lyttleton’s fund is ranked first in the IMA UK All Companies sector on a bid-to-bid basis. It is third out of 296 funds over one year, recording a return of 25.1% compared with the sector average of 13.5%.

Britton says: “Buxton is too talented not to return to the upper echelons of the UK sector. However, he did not have a good time over the summer, which may be due to running too much money or the style of the markets. Our job is about selling out of good funds and buying even better funds.”

While the performance of Buxton’s UK Alpha Plus fund has suffered in recent months, it is still top quartile in the UK All Companies sector since it launched over two years ago. A large part of the reason it has underperformed was Buxton’s avoidance of oil stocks, as identified in last week’s Fund Strategy.

Britton says that with 10 UK funds in its portfolio, T Bailey is holding two more than it would like. The UK comprises 15% of its allocation.

“We increased our UK holdings to 10 funds a year ago because of the risk in the market. We would like to reduce that to eight over the coming months. All the funds are under review,” he says.

However, Britton argues that increasing the number of UK funds in the portfolio has worked. He says: “In the first six months of 2004, the FTSE All-Share increased by 6.3% while the average return of the UK funds within our Growth fund at the end of June was 9.1%.”

The top five holdings in the fund are Framlington Equity Income, Rathbone Income, Fidelity Special Situations, Gartmore UK Focus and Old Mutual UK Select Mid Cap.

News Analysis, page 12