The IA UK All Companies sector is the largest in the Investment Association universe and home to some of the industry’s most recognisable names, many of whom have built up long-term track records of success.
Having previously looked at international equity funds and balanced multi-asset portfolios, FE Trustnet’s series on funds that have stood the test of time now turns to the IA UK All Companies sector to identify portfolios that have a long track record of consistent outperformance.
To recap, we have examined funds with a track record of 20 years or longer and worked out their average decile rankings over the 61 rolling five-year periods between 30 June 1998 and 30 June 2018. We then shortlisted those with an average five-year decile score of 3.5 or lower.
In the following article, we review four of the funds that have some of the best decile rankings while a following article will highlight another four that made the cut.
AXA Framlington UK Select Opportunities
First up is one of the best-known IA UK All Companies members – the £2.9bn AXA Framlington UK Select Opportunities fund. It has been headed up by the respected Nigel Thomas since 2002 and its only managers since launch in 1969 have been Thomas, Richard Peirson and Catherine Stanley.
However, Thomas is set to retire in March 2019 after 40 years in asset management. After this, the fund will be taken over by Chris St John, who has worked alongside Thomas for several years and will continue to do so over a transition period; in a recent FE Trustnet article, St John explained why investors will see little change in how the fund is managed once he takes the helm.
Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
Our data shows that AXA Framlington UK Select Opportunities achieved a 409.08 per cent total return over the 20 years examined in this research. Of those 61 rolling five-year periods reviewed, the fund was in the top decile for 11 of them and has an average decile ranking of 2.8, although performance has struggled in more recent time frames.
Square Mile Investment Consulting & Research, which gives the fund an ‘AAA’ rating, said: “This may be one of the rare occasions where past performance can tell us something about the skills of the fund manager. Mr Thomas has a remarkable track record, where he has consistently delivered a strong level of outperformance over the benchmark.”
On St John’s appointment, it added: “We view this as a sensible appointment and as the incumbent manager remains at the helm of the fund, we will therefore not be changing our AAA rating at present. We hold Mr St John in high regard, as reflected by our A rating on the AXA Framlington UK Mid Cap fund, a strategy which he manages.”
AXA Framlington UK Select Opportunities has an ongoing charges figure (OCF) of 0.93 per cent and is yielding 1.62 per cent.
Marlborough UK Multi-Cap Growth
Marlborough UK Multi-Cap Growth launched in July 1995. Over the 20 years we looked in this research, the £329m fund has built up an average five-year decile ranking of 2.07 and has spent 16 of these periods in the IA UK All Companies sector’s top decile.
Headed up by FE Alpha Manager Richard Hallett, the five FE Crown-rated fund made a total return of 502.85 per cent between June 1998 and June 2018. This is the sixth highest return in the peer group from the 81 funds with a long-enough track record.
Performance of fund vs sector between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
Hallett has managed Marlborough UK Multi-Cap Growth since he joined Marlborough Fund Managers in 2005; managers prior to this include Giles Hargreave and Mark Whittaker. The process behind the fund is bottom-up (although there is a macroeconomic overlay) and has a focus on quality stocks.
Analysts at FundCalibre said: “Marlborough has a fantastic track record when it comes to stock-picking skill and Richard is no different. This fund invests more in larger companies than most other Marlborough funds, but this is a deliberate move in order to pick up on the growth opportunities across the whole market spectrum.”
Marlborough UK Multi-Cap Growth has a 0.82 per cent OCF.
Schroder Recovery
While the previous fund invests in quality stocks, the next one on our shortlist has made its name with a value investing approach. The £1.2bn Schroder Recovery fund, which concentrates on companies that have suffered a severe setback in either share price or profitability, has an average five-year decile score of 2.1.
Between June 1998 and June 2018, the fund generated a total return of 569.07 per cent – which ranks it third in the IA UK All Companies sector over this time frame. Furthermore, it has spent 26 of the 61 five-year periods we looked at in the first decile.
Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
The portfolio has been managed by Kevin Murphy and Nick Kirrage since July 2006; both are founding members of Schroders’ global value team and co-manage the Schroder UK Income and Global Recovery funds.
“This quietly aggressive, value-driven fund has been run by the same lead managers since 2006, with a continuity of process and a very consistent track record,” analysts at FundCalibre said.
“Their style does lead to shorter periods of underperformance, but their core discipline of buying cheap stocks gives good long-term outperformance. For investors wanting exposure outside the mainstream large-cap UK equities, this fund offers an intriguing selection of stocks.”
Schroder Recovery has an OCF of 0.91 per cent and is yielding 2.37 per cent.
TM Cavendish Opportunities
The final fund highlighted in this article has made the highest return of all four as TM Cavendish Opportunities posted a 609.38 per cent total return over the two decades in question. This was the second-highest return in the IA UK All Companies sector over that period.
Paul Mumford has managed the fund since its launch in 1988.
It has an average five-year decile ranking of 2.85 over the 20 years in question and was in the peer group’s top decile for 26 of these periods. However, it is also the only fund on the list to spend at least one five-year period in the bottom decile.
Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
The fund’s high returns have come with higher volatility than its average peer. Indeed, its 20-year annualised volatility stands at 18.91 per cent, which is the highest in the IA UK All Companies sector, while its maximum drawdown was the peer group’s second biggest.
This is largely down to the fact that the fund focuses on small-caps, as reflected by the fact that its benchmark is the FTSE Small Cap ex ITs index rather than the more common FTSE All Share.
TM Cavendish Opportunities has a 0.80 per cent OCF and is yielding 1.40 per cent.