While there are standout managers in every fund sector, the highest number can be found in areas such as UK smaller companies, strategic bonds and UK all-cap strategies, according to FE ratings data. 
The FE Alpha Manager Ratings aim to identify the most talented fund managers operating in the UK asset management industry by highlighting the top 10 per cent on a range of measures.
The methodology behind the rating examines the performance of individual fund managers over the course of their career, focusing on consistency, stock picking skill and their ability to generate performance in rising and falling markets.
In this article, we have reviewed all of the Investment Association sectors with more than 10 members to discover which has the biggest share of funds with an FE Alpha Manager at the helm.
Source: FE Analytics
As can been seen in the table above, it’s the IA UK Smaller Companies sector that has the highest concentration of FE Alpha Managers – some 12 of its 47 members (or just over one-quarter) have one of the highly rated investors working on it.
The largest of these is the £1.5bn Marlborough Special Situations fund, which is run by Hargreave Hale’s Giles Hargreave (pictured) – who holds FE Alpha Manager status – and Eustace Santa Barbara.
Marlborough Special Situations has a very strong track record and is the highest returner over the past 20 years of the entire Investment Association universe after posting a total return of more than 2,300 per cent. This is around 1,000 percentage points more than the portfolio in second place.
“Hargreave has been running this fund since 1998 and has consistently outperformed the market and peers. In particular, the fund has outperformed in falling markets, such as the crisis year of 2008, and more recently in the sell-offs in 2011 and 2014,” the FE Invest team said.
“This is mainly due to good stock selection and risk management in troubled positions, but is also due to maintaining a high number of stocks, which means that huge losses in any one holding can’t affect the portfolio too much.”
Hargreave also co-manages two other funds in the IA UK Smaller Companies sector: Marlborough UK Micro Cap Growth (with Guy Feld) and Marlborough Nano Cap Growth (with Guy Feld and David Walton).
Performance of fund vs sector over 20yrs
Source: FE Analytics
Other large strategies from the peer group with an FE Alpha Manager include the £1.4bn Standard Life Investments UK Smaller Companies fund (Harry Nimmo) and the £1.4bn Merian UK Smaller Companies fund (Daniel Nickols).
Nimmo has managed Standard Life Investments UK Smaller Companies since its launch in January 1997 and uses a bottom-up investment process that looks for positive drivers of change within a company. The manager also built the proprietary stock selection Matrix system, which screens a universe of around 600 companies on a range of value, growth, quality and momentum factors.
On Merian UK Smaller Companies, Nickols follows an investment approach that has been in place for more than 20 years. This approach combines top-down and bottom-up analysis, essentially looking for the best stocks based on the team’s view of economic cycle's current positioning.
The IA Sterling Strategic Bond sector is another that has a high proportion of its members being run by FE Alpha Managers: 15 of its 77 members, or 19.5 per cent, holding the rating.
Jupiter Strategic Bond is the largest of these funds, with assets under management of £3.8bn and it is run by Ariel Bezalel. Bezalel has run the strategy since launch in 2008 and has established a strong track record; the fund has made around 120 per cent since inception, which is the second highest of the sector where the average member is up by less than 70 per cent.
Bezalel builds Jupiter Strategic Bond’s portfolio with a barbell approach, combining the capital preservation offered from high-quality government bonds with the income potential coming from high yield debt. He will also invest selectively in emerging market debt.
Richard Woolnough is another prominent FE Alpha Manager in the IA Sterling Strategic Bond sector, heading up the £3.7bn M&G Optimal Income fund with Stefan Isaacs.
Square Mile Investment Consulting & Research, which gives the fund an ‘AA’ rating, said: “Woolnough is a highly experienced and respected manager who has proven himself capable of combining the team's detailed credit analysis with his topdown views to produce impressive results through various market conditions.”
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
The sector with the third highest concentration of FE Alpha Managers is IA UK All Companies, which is the largest in the Investment Association universe. Some 18.1 per cent of its members (39 out of 215 funds) are run by a manager holding the rating.
The largest is the £7.4bn Invesco High Income fund, which is run by head of UK equities Mark Barnett; he also manages the £3.2bn Invesco Income and £256.6m Invesco UK Strategic Income funds. Barnett has a total return approach to equity income investing and focuses on undervalued businesses that have the ability to grow their dividends.
Nick Train’s £6.8bn LF Lindsell Train UK Equity fund – which has been one of the sector’s strongest members in recent years – is also on the list. Analysts with FE Invest said: “Achieving this impressive track-record with the low portfolio turnover highlights his stockpicking skills. We like the consistency of his strategy, which will not vary depending on the economic conditions.”
Liontrust Special Situations is another notable member of the peer group and it is run by two FE Alpha Managers: Anthony Cross and Julian Fosh. They use their Economic Advantage process, which looks for companies with intangible assets such as desirable intellectual property, strong distribution channels and significant recurring business.