Skip to the content

UK growth funds that have stood the test of time: Part 2

06 September 2018

FE Trustnet examines another group of IA UK All Companies funds that have made some of the best returns over the very long run.

By Gary Jackson,

Editor, FE Trustnet

IA UK All Companies funds are a mainstay of the typical investor’s portfolio as they offer exposure to domestic market and familiar companies, meaning that the sector is home to some of the best-known names in the industry.

In this series, we are reviewing funds with track records of 20 years or longer to discover 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.

There were a few IA UK All Companies funds that made the cut and in a previous article we looked at AXA Framlington UK Select Opportunities, Marlborough UK Multi-Cap Growth, Schroder Recovery and TM Cavendish Opportunities.

Here we consider four more members of the peer group that have generated some of the best five-year decile rankings over the past two decades.

 

Fidelity Special Situations

Over the 20-year period examined in this research (30 June 1998 and 30 June 2018), the IA UK All Companies fund that made the highest cumulative return was Fidelity Special Situations – which was up by 690.07 per cent on the back of a successful contrarian approach.

Furthermore, the £3.4bn fund has built up an average decile ranking of 2.59 over the 61 rolling five-year periods we looked at in this study – and spent 27 of these periods in the first decile.

The four FE Crown-rated is currently headed up by FE Alpha Manager Alex Wright, who took over in January 2014 and also runs the Fidelity UK Smaller Companies fund. Since launch in December 1979, the fund has only had two other managers: Sanjeev Shah, who ran it between 2008 and 2014, and Anthony Bolton, who was in charge between inception and 2008.

Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018

 

Source: FE Analytics

Square Mile Investment Consulting & Research has given the fund an ‘A’ rating and said: “Ultimately, there is a lot to like here and we have decided to support this fund because the manager has remained true to his investment style across this and all of the mandates he manages.

“He is supported by one of the UK's most substantial equity research teams and we believe that this style of investment and fund manager can continue to add value on an absolute basis and relative to its FTSE All Share benchmark.”

Fidelity Special Situations has an ongoing charges figure (OCF) of 0.91 per cent.


BlackRock UK Special Situations

While Fidelity Special Situations has a value investing approach, the next fund on the shortlist also focuses on ‘special situations’ but with a bias to growth. BlackRock UK Special Situations is built around companies that are valued at £1bn or less and have above average growth prospect, although it does have exposure to large-caps as well.

BlackRock UK Special Situations has an average five-year decile score of 2.93 and has been in the sector’s top decile in 12 of the 61 periods. With a total return of 526.93 per cent, the £707.4m fund has been the fifth highest returning member of the IA UK All Companies sector over the 20 years covered by this research.

Performance of fund vs sector between 30 Jun 1998 and 30 Jun 2018

 

Source: FE Analytics

The five FE Crown-rated fund is managed by Roland Arnold, who has worked on the portfolio since August 2012, and Luke Chappell, who joined in July 2015. Previous managers since the fund’s launch in 1981 include Richard Plackett, James MacMillan and Habib Annous.

BlackRock UK Special Situations currently has 37.38 per cent of its assets in large-caps, with names such as Rio Tinto, Royal Dutch Shell and Relx being among its largest holdings. There’s also 29.48 per cent in mid-caps and 33.33 per cent in small-caps.

FE Analytics shows that the fund has a 0.92 per cent OCF and is yielding 1.46 per cent.

 

Investec UK Alpha

Simon Brazier’s £2.2bn Investec UK Alpha fund is next on the list after establishing an average decile ranking of 3.25 during the 61 rolling five-year periods looked at in this research. Over the 20-year period the fund’s cumulative total return comes to 325.4 per cent – the 13th highest of the 81 IA UK All Companies funds with a long enough track record.

Brazier was appointed to the fund in January 2015, shortly after moving from Columbia Threadneedle Investments (where he was head of UK equities) to Investec Asset Management; FE Trustnet recently reviewed his first three years running Investec UK Alpha. Other managers of the fund since its launch in February 1979 include Jonathan Parker, Philip Rodrigs, Ken Hsia, Daniel Hanbury and Michael Rimmer.

Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018

 

Source: FE Analytics

Square Mile gives the fund an ‘A’ rating and noted that Brazier has used the same investment strategy throughout his career. The approach aims to exploit the short-term inefficiency of markets but focusing on the long-term value of companies and holding those that appear to be mis-priced.

The analysts also touch on why the fund has spent ‘only’ six of the 61 periods we examined in the top quartile, saying: “This is not a fund that necessarily aims to shoot the lights out on a performance level but instead looks to outperform regardless of the market backdrop. This means that, unlike more aggressive strategies within the UK All Companies sector, whose more stringent investment styles may cyclically fall in or out of favour, the manager is aiming instead to produce regular and attractive levels of outperformance.”

The Investec UK Alpha fund has an OCF of 0.83 per cent and is yielding 2.22 per cent. It holds four FE Crowns.


Standard Life Investments UK Equity High Alpha

The final IA UK All Companies fund highlighted in this research is Frederik Nassauer’s £247m Standard Life Investments UK Equity High Alpha fund.

This portfolio has an average decile ranking of 3.41 for the 61 rolling five-year periods looked at in this study. It was in the top decile for 16 of these periods and generated a 305.15 per cent total return for the overall time frame.

Performance of fund vs sector between 30 Jun 1998 and 30 Jun 2018

 

Source: FE Analytics

Nassauer has only managed the fund since April 2018. It was launched in Jan 1992 and past managers have included Henry Flockhart (January 2013 to April 2018), Ed Legget (October 2006 to December 2012), Euan Stirling (April 2001 to September 2006) and Karen Robertson (May 1995 to March 2001).

The fund aims for long-term capital growth with the prospect of some income through a relatively concentrated portfolio. There are currently 52 holdings with 55 per cent being in the FTSE 100 and another 37.7 per cent in mid-caps.

Standard Life Investments UK Equity High Alpha has an OCF of 0.90 per cent and is yielding 3.34 per cent.

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.