Invesco Perpetual Income, Liontrust Special Situations and Vanguard FTSE U.K. All Share Index are among the IA UK All Companies funds that financial advisers in the FE AFI panel think could be appropriate throughout the bulk of an investor’s time in the market. 
The FE Adviser Fund Index (FE AFI) is designed to act as an indicator of the UK funds market. The three FE AFI portfolios are compiled by a panel of the UK’s leading financial advice firms and showcase the funds they think most appropriate for investors of different risk tolerances.
The FE AFI Aggressive portfolio contains funds that the panel thinks could be suitable for an investor in their late 20s, FE AFI Balanced holds funds for a person in their mid-40s and FE AFI Cautious is made up of funds for those in their late 50s. These selections assume the investor is saving for a pension at 65.
In the following article, we look at the IA UK All Companies funds that can be found in all three of the FE AFI portfolios, suggesting they could be appropriate for investors at all stages. There are nine of these funds in total and we reveal them below, ranked from the lowest to highest returns over the past five years.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
First on the list, after making a five-year total return of 58.46 per cent, is Alastair Mundy’s £1bn Investec UK Special Situations fund. It is currently in the IA UK All Companies sector’s bottom quartile over three and five years owing to the underperformance of the value style of investing.
Investment analysts note that Mundy’s contrarian approach means the fund can underperform over the short and medium term but argue that it remains a strong option for long-term investors.
Square Mile Investment Consulting & Research, which gives the fund an ‘AA’ rating, said: “We have a high regard for Alastair Mundy and his team. They are seasoned investors with an investment process that has been successfully applied over time. It is somewhat unusual to find an investor with such a clear cut, focused and consistent approach.”
Investec UK Special Situations has an ongoing charges figure (OCF) of 0.84 per cent and is yielding 2.19 per cent.
Next up, there are three IA UK All Companies index trackers that the AFI panellists think could be held by investors of any age.
Fidelity Index UK, iShares UK Equity Index (UK) and Vanguard FTSE U.K. All Share Index can all be found in the FE AFI Aggressive, FE AFI Balanced and FE AFI Cautious portfolios.
Each of the three funds tracks the FTSE All Share index, which has made 63.33 per cent over the past three years. In comparison, the Fidelity tracker has made 59.49 per cent, iShares’ is up by 61.94 per cent and the Vanguard fund is in the lead with a 62.57 per cent total return.
All three are highly regarded by investment analysts. The Fidelity and iShares trackers can be found on the FE Invest Approved List while all hold a ‘recommended’ rating from Square Mile.
Fidelity Index UK has a 0.30 per cent OCF, iShares UK Equity Index (UK) charges just 0.06 per cent and Vanguard FTSE U.K. All Share Index’s charges come to 0.08 per cent.
Performance of funds vs sector and index over 5yrs
Source: FE Analytics
The above chart shows two funds run by FE Alpha Manager Mark Barnett that are held in the three FE AFI portfolios: Invesco Perpetual Income and Invesco Perpetual UK Strategic Income.
Of the two funds, Barnett – who is head of UK equities at Invesco Perpetual – has managed Invesco Perpetual UK Strategic Income for the longest time after taking over the product in January 2006. He was appointed to Invesco Perpetual Income in 2014 following the departure of Neil Woodford.
The FE Invest team said of Invesco Perpetual UK Strategic Income: “Barnett has done an excellent job of combining income with capital growth on his fund during some turbulent market conditions and has made bold calls that have made his investors a lot of money in the past.”
Invesco Perpetual UK Strategic Income has a 0.92 per cent OCF and is yielding 3.02 per cent. Invesco Perpetual Income’s OCF is 0.91 per cent and it yields 3.32 per cent.
Next up with a second-quartile total return of 89.77 per cent over five years is Liontrust Special Situations, which is run by the FE Alpha Manager duo of Anthony Cross and Julian Fosh.
The fund is managed using the managers’ Economic Advantage process, which looks for stocks possessing characteristics that rivals find difficult to replicate, such as intellectual property, strong distribution channels and significant recurring business.
“This is a very well-considered and defined investment process that steers the managers towards relatively steady businesses that are gradually growing and generating high levels of cash,” Square Mile wrote. “It is important to note that the fund tends to be structurally absent from certain sectors, so performance should be expected to deviate from the index at times. Pleasing for the current fund holders, this performance deviation has been impressively positive.”
Liontrust Special Situations has a 0.87 per cent OCF and is yielding 1.77 per cent.
In second place after making a top-quartile 101.89 per cent total return over five years is GVQ UK Focus, run by FE Alpha Manager Jamie Seaton with Jeff Harris as deputy.
The £362.5m fund’s process applies valuation techniques used in the private equity industry to publicly traded UK companies, putting a rigorous focus on cashflow and determining how much they would be worth to a private buyer.
The fund is a member of the FE Invest Approved List, with the FE Invest team arguing that the “patient, concentrated approach” used is one that could be attractive to those seeking a genuinely active fund.
“The fund’s excellent performance has coincided with the management of Jamie Seaton,” FE Invest said. “The focus on cashflow for valuation is a superior approach to the usual focus on the income statement and earnings-per-share figure, which are far too easily manipulated by companies to be reliable.”
GVQ UK Focus has a 1.01 per cent OCF and is yielding 2.41 per cent.
The final IA UK All Companies fund to appear in all three FE AFI portfolios is Old Mutual UK Mid Cap, which is headed up by FE Alpha Manager Richard Watts.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
As the chart above shows, the £3.2bn fund has outperformed both its average peer and its FTSE 250 (ex Investment Trusts) benchmark by a wide margin over the past five years. FE Analytics shows that it is in the peer group’s top decile and has beaten the index over one and three years as well as three and six months as well.
The FE Invest team said: “The fund has consistently beaten its benchmark, with the stock selection being the main driver of the performance. Gains from stock selection has been strong across time and industries, which would demonstrate the strength of the flexible investment process.”
Old Mutual UK Mid Cap has ongoing charges of 0.85 per cent and is yielding 0.80 per cent.