Sanford DeLand, the boutique asset manager behind the top-performing SDL UK Buffettology fund inspired by master US investor Warren Buffett, is to launch a smaller companies investment trust run along the same principles.
Filings on Companies House confirmed the incorporation of the ‘Buffettology Smaller Companies Investment Trust’ on Friday, to which Sandford DeLand is set to be the investment adviser.
Stellar returns from its successful quality growth stock picking combined with hefty inflows of money from new investors have lifted its assets from just £169m three years ago and £532m at the end of 2018.
Over the last three years the Buffett-inspired fund has delivered a 29% return for investors, far better than the average fund in its UK All Companies sector, which has lost 8.2%, and the FTSE All-Share index, which has slipped 9.1%.
From launch to the end of June, the fund delivered a 225% gain, which made it the absolute best performer in its sector, where the average fund returned 61%, according to company factsheets.
Even more impressive, perhaps, over the same time frame the fund has also beaten the Sage of Omaha’s own Berkshire Hathaway, whose shares rose 186% in sterling terms.
Three-and-a-half years ago, the asset manager also launched the Free Spirit fund, which remains a minnow at £15m of assets. It is run by Ashworth-Lord with Andrew Vaughan, who was promoted from analyst after the departure of co-manager Rosemary Banyard.
The pair of funds’ strong performance has put them at number one and two in their sector over the last three years.
As Buffettology has swelled in size, Free Spirit has increasingly taken up the mantle for the group’s investments in the very smallest companies, including some worth less than £100m, which Ashworth-Keith has said are now effectively out of bounds for the larger fund.
The name of the new trust reveals it will plough a similar ‘small-cap’ furrow, with the additional ability to use gearing, or borrowing, to increase investments on behalf of shareholders, and perhaps even allocate a modest amount in unquoted private companies that have not yet reached the stock market.
Manchester-based Sanford DeLand was established in March 2010 by Ashworth-Lord (pictured), a former stock broking analyst who wanted to launch the Buffettology fund.
Ashworth-Lord is the firm’s largest shareholder, while another major investor is financial products distributor LGBR Capital. Banyard, who left Sanford DeLand last year after two years at the firm and has now joined Downing, also holds a stake.
The ‘Business Perspective Investing’ approach used across the group is inspired by Berkshire Hathaway chairman Buffett, focusing on buying ‘great businesses’ for the long term and then doing little trading. Key features the managers look for in companies include enduring franchises with strong pricing power, high returns on capital, predictable performance and earnings, and strong balance sheets.
At the end of June, top investments in Buffettology included a 8.6% position in Games Workshop (GAW) and 5.7% in Liontrust Asset Management (LIO), according to its latest factsheet. However, the fund does also carry some weighty stakes in larger companies, such as 4% in London Stock Exchange (LSE) and 3.6% in credit scorer Experian (EXPN).
Reflective of the firm’s ‘multi-cap’ approach the smaller company focused Free Spirit fund also holds big positions in FTSE 100 giants like Unilever (ULVR).
Both the funds hold relatively high levels of cash, which in the case of Free Spirit Vaughan has told Citywire was partly to ensure sufficient liquidity, or cash, to meet investors’ redemption requests. This would not be an issue with the closed-end investment trust in which investors wanting to exit sell their shares rather than waiting for the fund manager to find the cash.
Rights to the ‘Buffettology’ label are used under licence from Warren Buffett’s former daughter-in-law Mary Buffett and David Clark, authors of a book of the same name.
The launch of the trust remains subject to approval by the Financial Conduct Authority.