Sanford Deland Asset Management CIO Keith Ashworth-Lord has said market-cap drift in the Buffettology fund is due to the success of its holdings as he responds to concerns Interactive Investor has made about key-man risk at the firm.
The UK equities fund manager also said he will not be pushed into making a “premature” announcement on succession planning at the business.
On Tuesday, the D2C platform announced it was placing the CFP SDL UK Buffettology under review on its Super 60 buy list, alongside Crux European Special Situations and Lindsell Train Japanese Equity.
II said it had concerns about Buffettology’s size, key-man risk and resource. The fund has grown from £600m assets under management when the ii Super 60 launched in January 2019 to over £1.7bn today. Additionally, CFP SDL UK Buffettology manager Ashworth-Lord has taken on management of the SDL Free Spirit fund following the departure of Andrew Vaughan.
But Ashworth-Lord has defended resourcing at SDL and capacity in the UK Buffettology fund.
“We will not be bounced into making a premature announcement,” he said on succession planning. “Having said that, the subject has been under active consideration at all levels in the business for some time and a plan is in place. We know how the future structure will look and will announce it to the outside world in due course.”
He said resourcing had improved in the period that SDL UK Buffettology had been on the II Super 60 list with Eric Burns joining as chief analyst and David Beggs and Chloe Smith joining as research analysts in the last month. On the operations side, Alex Brotherston has been chief executive for two-and-a-half years.
In response to II’s observation that the average market cap within the fund had drifted upwards, Ashworth-Lord said this was due to the success of companies such as Games Workshop, Liontrust, Dechra, Bioventix and AB Dynamics. Last October, SDL attempted to launch a Buffettology Smaller Companies investment trust but the IPO was pulled as lockdown restrictions dampened demand.
“We don’t chop and change the portfolio. That’s why our portfolio turnover is low and we capture such huge movements such as the companies mentioned.”
The fund has made eight disposals across the market-cap spectrum in the last three years.
From the micro-cap cohort, Driver, Air Partner and Revolution Bars were dropped for their negative contribution to the fund. The trio accounted for 1.5% of net asset value. Next and Restaurant Group were dropped at the start of lockdown, while GlaxoSmithKline and Provident Financial were exited because Ashworth-Lord deemed them “problem companies”. Additionally, Scapa Group was part of a takeover.