Juliet Schooling Latter, research director at FundCalibre, picks out a UK focussed fund that has been a success story despite the negative sentiment towards the UK markets.
If I were to ask you to describe the fortunes of UK equities over the past decade, I am sure the majority of the response would be negative. Cheap, unloved and battered are the words that come to mind to describe the challenges since the Brexit vote in 2016.
Almost every presentation I have seen on UK equities in recent years has discussed the growing valuation discrepancy and the need for an inflection point. The past three years have actually been strong for UK equities, particularly the FTSE 100, yet investor outflows continue as sentiment remains in the doldrums
But there have been success stories in the past decade – with good stockpickers able to consistently spot opportunities through a flexible approach. A good example is the Artemis UK Select fund, a concentrated portfolio of 40-50 holdings which has delivered 185% to investors in the past 10 years*.
Managers Ed Leggett and Ambrose Faulks are free-cashflow focused, which means they invariably screen as value; in practice they are targeting good businesses with strong economic moats.
It sounds obvious – but in a simplistic sense, the fund’s primary goal is to identify companies with growing earnings potential while also being undervalued by the market. While they do not necessarily like to be anchored to one type of investment style – there is an argument that this fund actually fits the ‘Growth-at-a-Reasonable Price’ tag. This explains why the P/E ratio of the fund is lower than the FTSE All-Share (10.3x vs. 12.7x)**.
A good example of the success of this process includes buying the likes of Barclays and Standard Chartered on 0.4x price to tangible book value (P/TBV), with both now standing at 1x and 1.2x.
“The analysis for Standard Chartered came at the back end of Covid when interest rates were almost zero. We felt US interest rates had to go up by only 100 basis points for this to be a sensible investment. They rose significantly more – but we had the analysis done and got ahead of the story. They are now on course for a 13% or so return on tangible equity this year, which would more than justify paying a premium to book. Given that Standard Chartered has a huge ASEAN footprint – it means there should be a bit more material growth,” Faulks says.
Although they are stockpickers, Faulks says a macro focus has to come into the equation – adding that you cannot simply have a view on banks, for example, without having an opinion on unemployment, interest rates, inflation and five-year swaps.
While stock selection has added value throughout the past decade, Faulks says the macro has been against them in certain periods, particularly between 2017 and the start of Covid when “the world just wanted to own a bond proxy”.
“Our outperformance in that period came into a slight headwind. We are now in a more neutral macroeconomic environment, meaning both our macro and stock selection overview have been more accretive to performance,” he says.
A unique feature of this fund is its ability to short up to 10% of its net asset value, typically in 3-10 positions. This shorting capability adds another layer of potential outperformance – adding around 30 basis points per annum since the pair came together.
The fund currently has its largest overweight in the financials and consumer discretionary sectors**. Faulks believes the banks offer the best opportunity for investors in UK equities at present; although they have risen, he says it is from a derisory starting valuation, with the likes of Standard Chartered, Barclays, NatWest, Lloyds and HSBC all among the fund’s top 10 holdings**. He says the banks are effectively into three years of rehabilitation after 15 years in the sin bin, citing low credit risk, low valuations, improving regulation and a capital intensity of income streams which is misunderstood.
While consumer confidence remains low, there are positives for this sector too, with real wages turning positive and leverage low versus history. Faulks says Marks & Spencer is a good example of their process in action – highlighting that their shares currently trade on 10x earnings in their first clean year since the much-publicised cyber attack. M&S is also taking strong market share on both food and clothing.
He says: “To me M&S offers a rare value combination. Look at Tesco (14x earnings) and Next (16x) – M&S is broadly a composite. There is restructuring taking place and they should be able to grow earnings in high single or low double digits.”
The team still have a preference for large-caps, given the opportunities, but are happy to invest further down the market-cap scale.
This fund stands out as one of the premier UK equity funds due to the impressive track record of its managers. The fund has thrived since Ed and Ambrose started working together in late 2015. Their high-conviction approach and flexibility in stock selection make it an attractive choice for investors who are comfortable with higher levels of risk in pursuit of substantial long-term gains. This fund is well suited for those seeking high reward potential but are willing to accept greater volatility.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Juliet’s views are her own and do not constitute financial advice.
*Source: FE Analytics, total returns in pounds sterling, 11 December 2015 to 11 December 2025
**Source: Artemis, December 2025
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