Artemis US Equity, Vanguard Global Emerging Markets and Fidelity Asian Dividend are some of the smaller funds in their sectors but have been attracting relatively high levels of interest from professional investors, Trustnet research shows. 
As we have seen in previous articles looking at the research trends of the advisers, wealth managers and other professionals that use FE Analytics, the larger funds in the industry tend to hoover up the most attention.
The FE Analytics Market Intel Tool tell us that the most heavily researched Investment Association funds over 2019 include some of the biggest names in the business.
The £18.4bn Fundsmith Equity fund is the most popular strategy on FE Analytics, while the likes of the £6.6bn LF Lindsell Train UK Equity, £4.9bn Jupiter European, £5.6bn BNY Mellon Global Income and £6bn Invesco High Income funds can also be found in the top 10.
Source: FE Analytics Market Intel Tool
However, there are some smaller funds that have been capturing more research by professional investors.
In this article, we looked for equity funds that have assets under management (AUM) of less than £100m but are attracting at least 10 per cent more research activity than the average member of their sector. We also concentrated on those that hold the highest FE fundinfo Crown Rating of five.
The small top-rated fund that has been punching above its weight the most is Fidelity Asian Dividend. This £83m fund’s research activity is 41 per cent higher than the average member of the IA Asia Pacific Excluding Japan sector.
The fund is managed by Jochen Breuer and is currently in the peer group’s top quartile for total returns over the past three and five years. Since Breuer took over in October 2016, the fund has made a 36.48 per cent return, compared with 26.66 per cent for the sector and 19.65 per cent for its MSCI AC Asia Pacific ex Japan High Dividend Yield benchmark.
Performance of fund vs sector and index under Breuer
Source: FE Analytics
Breuer recently told Trustnet how attractive Asian equities can be for income investors, noting that Fidelity Asian Dividend has increased payouts to investors at a compound annual growth rate of 18.1 per cent while the average yields in the region stand at around 3 per cent.
“That is higher than the global market and significantly higher than the US, which has a similar payout ratio. If you look within Asia, you have more developed countries such as Australia, Taiwan and Singapore that have tax advantages for companies that pay higher dividends and deliver high headline yields, but probably with lower-growth prospects,” he explained.
“On the other hand, you have some of the more emerging countries such as India, China and the Philippines where payout ratios are significantly lower, around 30 per cent, but that can deliver higher dividend growth.
“Taking that together allows me as an income investor to put together a portfolio which has an attractive headline yield, but that can also deliver dividend growth over time.”
Source: FE Analytics
In second place is the £88.2m Vanguard Global Emerging Markets fund, which is receiving 39 per cent more research activity than the average member of the IA Global Emerging Markets sector.
While Vanguard is best known for its index-tracking funds, this is an active strategy. The portfolio is managed by three different fund houses to give investors exposure to a range of styles: Baillie Gifford focuses on growth stocks, Pzena Investment Management is a value investor and Oaktree Capital Management has an opportunistic style that combines elements of growth and value.
The fund has made a 27.37 per cent total return over the past three years, putting it in the peer group’s first quartile. It is in the second quartile over one year after making 13.3 per cent.
ASI UK Mid Cap Equity appears in the third place in this study, with the £62m fund getting 28 per cent more research hits than its average peer in the IA UK All Companies sector.
The fund, which is managed by Abby Glennie and was until recently called Aberdeen UK Mid-Cap Equity, has made top-quartile returns over the past one, three, five and 10 years. Glennie uses a quality, growth and momentum approach that looks for companies with a range of high-quality characteristics, operate in growing markets and display positive business momentum.
Fraser Mackersie and Simon Moon’s £31.1m Unicorn UK Ethical Income fund is next thanks to it receiving research activity that is 22 per cent higher than the average for the IA UK Equity Income sector.
Mackersie and Moon have a strong track record on the £623.6m Unicorn UK Income fund; Unicorn UK Ethical Income uses a similar approach but avoids companies that derive their revenues from areas such as tobacco, arms, pornography and others that do not pass their ethical screens.
Like Unicorn UK Income, this fund concentrates on smaller companies – which means it looks very different to the average UK equity income fund and its bias to blue-chips. Unicorn UK Ethical Income made a top-quartile total return of 23.55 per cent over the three years to the end of October 2019.
The final fund on the list is Cormac Weldon’s Artemis US Equity fund, which has AUM of £54.1m but has been researched 16 per cent more frequently than the average IA North America member.
The fund currently in the peer group’s top quartile over one, three and five years. Weldon’s approach looks for high-quality companies that are not too dependent on the economic cycle and the manager sees no reason to change this despite the recent outperformance of value.
“Recently, there has been a lot of comment about the gap in valuation between high-growth stocks (those with above-average prospects for earnings growth) and ‘value’ stocks (those trading on below-market valuations), often given as a justification for buying the latter,” the manager said.
“Our stance has been to be underweight both types of stocks. We do not focus on the fastest growing companies in the market. Given the economic uncertainty stemming from slowing global growth, trade wars and the upcoming US presidential election, we do not find many ‘value’ situations attractive enough to invest in. Instead, we favour companies with predictable earnings and modest valuations.”