The Citywire AA-rated managers made the comments in the latest update for their JOHCM UK Equity Income fund.
While much global attention has fallen on the tensions in Eastern Europe, the two managers said this had masked the relatively poor performance of their market of choice.
‘Markets appear to have concluded that the Crimea annexation is unlikely to lead to a wider escalation of issues. Ironically, one of the worst performing markets over the month [of March] was the UK,’ the pair wrote.
Beagles and Lowen referenced Chancellor George Osborne’s Budget, which they said produced few shocks, but had caused ‘major dislocations’ in areas such as the life assurance sector.
‘Following on from widespread political commentary and ultimately a Competition Authority referral in the power sector, it is easy to see why investors have become very concerned about growing political risk in the UK ahead of the general election in May 2015. Chasing votes with populist, anti-capitalist rhetoric is a dangerous game.’
Lowen and Beagles said the political discussions threatened to pull focus from an increasingly robust UK economic recovery. The pair said it was much stronger than just an improvement in the housing sector, which many media outlets seemed fixated on.
The duo said a more volatile investment backdrop had led them the make a higher level of changes over March than in previous months.
Over the month, Beagles and Lowen exited a position car dealership Lookers and also reduced positions in asset management firms F&C and Aberdeen, although they said the Aberdeen reduction was a ‘reluctant’ trade.
‘There is still much to like here – the low valuation, emerging markets being out of favour, elements of the SWIP transaction and the strong balance sheet.’
‘However, the significant and continued underperformance of certain parts of the company’s fund range means we are likely to see accelerating and persistent fund outflows that will make a near-term re-rating based on the positives we have identified harder to crystallise.’
Still in the asset management space, the pair added Old Mutual to the fund and opened a position in Brit Insurance via its IPO in March.
The JOCHM UK Equity Income fund has returned 200.6% over the five years to the end of February 2014. Its benchmark, the FTSE 350 Higher Yield, has risen 112.23% over the same period.