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Private investors

Artemis UK Special Situations Fund

All data as at 31 January 2017 except where specified
  • Summary
  • About the fund
  • Performance (class R)
  • Performance (class I)
  • Composition
  • Key facts
  • Investment insights
  • Literature
  • How to invest


The fund’s aims

The fund aims to provide long-term capital growth by exploiting special situations. The fund invests principally in UK equities and in companies which are headquartered or have a significant part of their activities in the UK which are quoted on a regulated market outside the UK.

Current prices and yield
(class R)

As at noon, 24 February 2017
Bid price (acc units)559.22p
Offer price (acc units)593.36p
Historic yield (acc units)1.55%

Investment information
(class R)

Minimum lump sum investment£1,000
Ongoing charge (acc units)1.56%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 1.5% and is shown as at the date of the Key Investor Information Document (KIID), where a full explanation of the fund's charges can be found.

Fund managers’ update

A volatile start to 2017 brought some unexpected updates. Perhaps the biggest surprise came from BT, which announced that it had uncovered fraud in its Italian operation and was suffering from a slowdown in some government contracts. While the news from Italy is unwelcome it should (we hope) be a one-off. Of more concern is whether the slowdown in the government business marks the start of a more serious downturn. Its consumer businesses are trading well and the downgrade to profits was only about 6% - if larger in terms of free cashflow. After falling by 17% on the month, the shares now trade on 11x earnings and generate a 5.5% dividend yield. We retain the holding for the time being.

Tesco provided a more welcome surprise as it announced a merger with the wholesaler Booker.

The second unwelcome surprise came from Pearson, where trading deteriorated significantly at the end of last year and profits were downgraded. Given last year’s well-publicised problems, the shock was rather less than in the case of BT. But we had assumed its significant cost-cutting programme would offset problems in its higher education business in the US. The company is looking at removing further costs and disposing of its stake in Penguin Random House. All this feels a bit late. While the other businesses are performing in line with expectations, we feel the management have not got a proper grip on the US business so have reduced our position.

Tesco provided a more welcome surprise as it announced a merger with the wholesaler Booker. Both companies have strong positions in their respective markets and the combined entity should enjoy significant synergies. They will, however, need to get the deal past the competition authorities. Assuming they do, we believe this combination will, by bringing together two of the best management teams in the food business, create value for shareholders. On a similarly positive note, there were encouraging year-end updates from Synthomer and SDL. Both companies are performing well under their new management teams.

04 November 2016

Derek Stuart: We buy stocks, not the market …

Although economic risks are rising, the UK market has been too. Although overall valuations are looking stretched, this conceals considerable opportunities, according to Artemis’ Derek Stuart.

Value of £1,000 invested at launch to 31 January 2017

Value of £1,000 invested at launch to 31 January 2017

Data from 9 March 2000. Source Lipper Limited, accumulation units, bid to bid in sterling to 31 January 2017. All figures show total returns with dividends reinvested.

Asset allocation

Asset allocation

Source: Artemis as at 31 January 2017. Please note figures may not add up to 100% due to rounding.

Percentage growth (class R)

20162015201420132012
12 months to 31 December7.3%5.2%-0.7%28.3%18.4%
20172016201520142013
12 months to 31 January10.8%0.6%0.0%20.8%19.5%
Please remember that past performance is not a guide to the future. Source: Lipper Limited, accumulation units, bid to bid in sterling. All figures show total returns with dividends reinvested.

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Derek Stuart: We buy stocks, not the market …





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About the fund

The Artemis UK Special Situations Fund aims to achieve superior long-term growth by looking for unrecognised growth potential in companies, often those that are unloved or out-of-favour.

  • Unrecognised opportunities: ‘special situations’ are companies that are in recovery, need re-financing or are suffering from investor indifference. The manager views ‘problem investments’ as potential opportunities and looks for hidden value. They often have the potential to deliver significant capital growth.
  • Favours smaller and medium-sized companies: because these sizes of companies are often under-researched by the broader investment community, detailed research in this area of the market can identify growth opportunities and valuation anomalies.
  • Meeting management: personal knowledge of management teams aids the managers’ understanding of what might be achieved by the companies in which they invest. A direct match of the interests of company management and the company’s shareholders is an important consideration.
  • Flexible approach: the managers are free to invest across the range of company sizes, allowing them to select only those stocks which they feel offer strong capital growth potential. The fund typically holds 60-70 stocks.
  • Experienced team: managers Derek Stuart and Andy Gray have many years’ investment experience between them. Derek is a co-founder of Artemis and has managed the fund since its launch in March 2000.

Reasons to consider

The fund may be suitable for investors looking for:

  • the potential for capital growth
  • exposure to the growth potential of companies in turn-around situations
  • exposure to smaller and medium-sized UK companies
  • experienced fund managers with a good long-term track record

Introducing the fund

Derek Stuart introduces the Artemis UK Special Situations Fund and outlines how he makes investment decisions.

Risk considerations

Before making an investment, investors should consider the level of risk they’re comfortable taking with their money.

  • This fund invests in UK companies that are going through difficult times but which the managers believe can be successfully and profitably resolved. They carefully scrutinise the companies before investing, looking for those that will deliver good returns over the longer term.
  • Many of the fund’s investments will be in smaller or medium-sized companies, which can be more vulnerable to financial or operational failure than larger, more established businesses.
  • Investors should also be aware that the usual risks of investing in stocks and shares apply. Companies and stockmarkets can go through periods of turbulence and the value of your investment can fall.
  • This fund’s ‘SRRI’ risk rating, a measure of how volatile the fund’s performance has been over time, is currently 5, in a range of 1 (lower risk) to 7 (higher risk).

More detailed information on fund risks is included in the ‘risk warnings’ section below.

Risk warnings

To ensure you understand whether this fund is suitable for you, please read the Key Investor Information Document, which is available, along with the fund’s Prospectus, from artemis.co.uk.

The value of any investment, and any income from it, can rise and fall with movements in stockmarkets, currencies and interest rates. These can move irrationally and can be affected unpredictably by diverse factors, including political and economic events. This could mean that you won’t get back the amount you originally invested.

The fund’s past performance should not be considered a guide to future returns.

The fund may invest in the shares of small and medium-sized companies. Shares in smaller companies carry more risk than larger, more established companies because they are often more volatile and, under some circumstances, harder to sell. In addition, information for reliably determining the value of smaller companies – and the risks that owning them entails – can be harder to come by.

The historic yield reflects distribution payments declared by the fund over the previous year as a percentage of its mid-market unit price. It does not include any preliminary charge. Investors may be subject to tax on the distribution payments that they receive.
FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trademark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE data is permitted without FTSE’s express written consent.

Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.

Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.

Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.

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