Redemptions free up £75m in Old Mutual UK Dynamic Equity

The capacity-constrained Old Mutual UK Dynamic Equity Oeic has £75m of shares open for investment after a number of redemptions.

The fund has seen roughly that amount redeemed from the fund, and the existing shares can therefore be picked up by new investors.

Early last year the fund’s share number was capped at 120m to keep the portfolio at a manageable size. New investors had to wait for shares to be redeemed before entering the fund. 

The £241.1m fund is first quartile over one, three and five years to 1 September, according to FE Analytics.

Rathbones head of multi-asset investments David Coombs says he took the opportunity to invest in the fund, which was essentially closed to new investment before.

“The fund is one that we have been interested in for some time, so we took the opportunity to participate.

The long-short equity fund, run by Luke Kerr, fits with the Rathbones team’s view that UK growth prospects have been inflated, Coombs says.

“We like funds where capacity is managed appropriately and Old Mutual seem to be doing that.”

An Old Mutual Global Investors spokeswoman confirmed about £75m had left the fund in recent months which means more investors can enter.

“The fund consists of a ‘best ideas’ long book combining the strongest ideas from across the small and mid-cap desk into a focussed portfolio of circa 40 to 60 stocks (currently 50),” she says.

“The fund capacity has been set at a level to achieve this level of focus whilst maintaining sufficient liquidity in the underlying positions to allow the manager to remain relatively nimble.”

Chelsea Financial Services managing director Darius McDermott says the Old Mutual team is “one of the premier” mid and small cap teams in the UK.

“It’s an attractive franchise so I would imagine they would have demand for that limited amount of capacity,” he says.

Capping the units of an open-ended fund is “rare”, but a good idea for some types of funds, he adds. 

“It’s a very sensible way to deal with capacity, especially for mid and small cap funds.”