The UK Smaller Companies sector has enjoyed a strong rally over the last year at a time when many large, global businesses have been dogged by concerns over the slowdown in China and emerging markets.
One relatively small fund in this sector that has caught our eye is the AXA Framlington UK Smaller Companies fund. Unlike some of the bigger beasts in the sector which actually invest heavily in mid-caps because of their size, this is a true smaller companies fund with around 40% in AIM.
The fund is run by young manager Henry Lowson who took the reins in 2012, a period over which he has propelled the fund to the top of the sector, making it soar 27% over the past year alone. Top holdings in the 80 stock portfolio include plastic packaging firm RPC Group, IT group Redcentric, promotional gifts company 4Imprint and Scottish media firm STV Group which produces the likes of Emmerdale, Coronation Street, the X Factor and Britain’s Got Talent.
Another relatively unknown fund that has delivered a fire cracking performance is the CF Miton UK Value Opportunities fund, this time in the massive UK All Companies sector. The fund is up 25% over the year, representing a 22% outperformance of the FTSE All Share.
Co-managed by George Godber and Georgina Hamilton, it focuses on scooping up undervalued companies with strong balance sheets, often where there is a catalyst for change underway such as corporate restructuring. An example is Dairy Crest, owners of the Cathedral City cheese brand, which recently disposed of its loss making milk division, or digital payments firm Optimal Payments which acquired its main competitor, Skrill.
In the popular and hugely competitive UK Equity Income sector, the Standard Life UK Equity Income Unconstrained fund, which we began backing a couple of years ago, continues to deliver blistering outperformance through an approach which invests right across the UK market cap spectrum, rather than focusing on the ‘usual suspects’ of the FTSE 100 Index. Having wisely avoided commodities and energy stocks, manager Thomas Moore has recently begun building a position in mining giant BHP Billiton.
We’ve also recently added to our UK Equity Income line up the Ardevora UK Income fund, managed by Jeremy Lang and William Pattisson, which has yet to arrive on the radar of many advisers. The fund has a distinctive approach of identifying the sources of bias that creep into the markets, creating both risks and pricing anomalies to determine stocks to avoid and others to back.
The results have been outstanding, with the fund having outperformed every year since launch in 2011 and top of the sector over the last 12-months with a 15% return, almost twice that of the sector average.
Finally, amongst the major equity market sectors, one of the standard out performers of the last 12 months has been Europe, as the eurozone economy has been recovering and enjoying two sources of support: a massive stimulus programme from the European Central Bank and low energy prices putting more cash in the pockets of consumers.
One of the stellar performers against this backdrop has been Alex Darwall’s Jupiter European fund, a high conviction portfolio of 30-40 shares in world-class companies with unique products or services such as healthcare groups Novo Nordisk and Fresenius, financial services tech firm Wirecard which competes with likes of PayPal and Western Union and RELX (formerly Reed Elsevier) the Anglo-Dutch information provider. The fund has rocketed 21% over the last year, an impressive 15% outperformance of the FTSE Europe ex UK Index.
Investors who’ve not taken a close look at their investment for a while might make use of the darker Autumn evenings stuck in doors to review their holdings to see whether any should be chucked in the bonfire and swapped for ones which can add more sparkle.