Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
- Richard Bullas recently took over as lead manager after Paul Spencer stepped back from fund management
- Recent performance of both the fund and the benchmark has been weak although we think Bullas has the ability to do well over the longer term
- We think this is an excellent option for investing in medium-sized UK companies
- This fund is on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential
How it fits in a portfolio
Franklin UK Mid Cap aims to deliver long-term growth by investing in medium-sized UK businesses, which have more room for growth than larger companies and are less risky than smaller ones. The fund could be a useful option for the UK portion of an adventurous portfolio, or work well alongside funds investing in large UK businesses to achieve broader UK stock market exposure.
Manager
Richard Bullas recently took over the running of Franklin UK Mid Cap. He began his career working in accountancy audit before moving to Aviva as an analyst. He joined Rensburg Fund Management, which later become Franklin Templeton Fund Management, in 2000. Bullas became a fund manager in 2006 and has covered the UK smaller companies sector for most of that time.
As well as being the lead manager of this fund, Bullas is also involved in Franklin UK Smaller Companies and Franklin UK Managers Focus. There are some similarities between these funds, and we think he’s able to comfortably manage his commitment to each portfolio.
Bullas has the support of a strong team at Franklin. We highly rate some members, such as Mark Hall, who works with Bullas on all his funds. They collectively have a lot of experience and Bullas has worked with the team for well over a decade, as he had with the fund’s previous manager, Paul Spencer, who has now stepped back from fund management.
We were disappointed to hear of Spencer’s retirement, but with Bullas’ experience, including his involvement with Franklin UK Mid Cap since 2013, we think the fund is in good hands and are comfortable for it to remain on the Wealth Shortlist. We continually monitor funds on the list, and will keep investors updated if our views change.
Process
Bullas invests in companies from the FTSE 250 (excluding investment trusts) index that he thinks will deliver long-term growth. He likes those with a sound business model, healthy finances and a strong management team. He makes sure the portfolio has investments from a diverse range of sectors and often invests in unpopular or unfashionable businesses and industries. Bullas invests in a relatively small number of companies, giving each one the potential to make a meaningful difference to overall performance, but it’s a higher-risk approach. Bullas can invest in smaller companies within the index, which also adds risk.
The portfolio is currently invested more than its benchmark index in financial services, industrial engineering, support services and tech hardware, and less than the index in travel & leisure, real estate services, software and computer services.
Recent new investments include bakery food retailer Greggs, pub chain JD Wetherspoon and student accommodation developer Unite Group. Their share prices were all hit hard by the lockdown in the UK but Bullas thinks they could emerge from the pandemic in a strong position.
In keeping with the discipline to only invest in companies listed on the FTSE 250 index, alternative asset manager Intermediate Capital Group was sold as it grew large enough to join the FTSE 100 index.
Culture
Bullas and the team are based in Leeds, unlike most London-based fund managers. We think that’s a good thing as they can avoid the ‘noise’ of the capital. They have a collegiate culture, with lots of collaboration and support for each other.
The team is part of the wider Franklin Templeton group, so they enjoy the resources of being part of a large organisation. The Leeds office operates like a boutique fund group though, as they’re given the freedom to invest largely without interference.
Cost
The fund usually has an annual ongoing charge of 0.83%, but we’ve negotiated a 0.2% saving so it’s available to HL clients for 0.63%. This is one of the lowest charges among actively-managed UK mid cap funds. The HL platform fee of up to 0.45% per year also applies.
Performance
Both the fund and medium-sized UK companies in general have struggled recently amid market volatility. The UK was one of the worst-affected markets by the pandemic-induced turmoil, and the FTSE 250 was the weakest of the UK indices. During…