Inevitably, star managers tend to be identified with the fund or funds that form the basis of their track record – take Neil Woodford
and his two Invesco Perpetual income funds, Harry Nimmo’s
Standard Life Smaller Companies fund, and Nigel Thomas’
AXA Framlington UK Select Opps portfolio.
However, some managers head up smaller, lower profile funds, which boast very strong track records in their own right. In the next few weeks, FE Trustnet will highlight a selection of these portfolios, which may have gone under the radar of some financial advisers and retail investors.
First up, we look at those managed by FE Alpha Manager Giles Hargreave
, whose £493m Marlborough Special Situations
fund is a favourite with those looking for exposure to the UK small-cap market.
Hargreave has headed up the fund for more than 14 years, and amassed a stellar track record, delivering 1,114 per cent, compared to 188 per cent from its IMA UK Smaller Companies
sector and benchmark.
Aside from Marlborough Special Situations, Hargreave manages four other funds, including another small-cap portfolio, a multi-cap growth portfolio, a UK equity income portfolio, and a venture capital trust (VCT).
The fund with the longest track record under Hargreave is Marlborough UK Leading Companies
, which sits in the UK All Companies sector. Since taking charge of the portfolio in July 2002, it’s returned 163.09 per cent, almost doubling the returns of its IMA UK All Companies sector average and benchmark.
In a sector comprising 293 portfolios, only 10 have returned more over this period.
Performance of fund versus sector since July 2002
Source: FE Analytics
It’s a top quartile performer over a three, five and 10 year period.
Marlborough UK Leading Companies is very much a multi-cap portfolio, drawing on Hargreave’s expertise in small-caps, and combining it with his highest conviction calls in the large and mid cap markets. Top-10 positions include FTSE 100 giants AstraZeneca and Diageo and FTSE 250 industrial rental company Ashtead Group.
The fund currently has 30 per cent in mega caps, which Hargreave defines as a company with a market cap of more than £20bn, 28 per cent in large caps [£5bn-20bn], 32 per cent in medium caps [£1bn-£5bn], 8 per cent in small caps [£250m-£1bn], and the rest split between micro caps, cash, property and bonds.
In spite of the portfolio’s small-cap bias, it’s only a touch more volatile than its sector over 10 years, and is less volatile over five years. This is thanks largely to its strong performance in 2008, when it lost 7.36 percentage points less than the average UK growth fund.
While few funds in the sector have a record to challenge it, Marlborough UK Leading Companies has only £75m assets under management (AUM).
The four-crown rated fund has a minimum investment of £1,000, and a total expense ratio (TER) of 1.55 per cent. Richard Hallett has been co-manager on the portfolio since January 2009.
Marlborough UK Micro Cap Growth
is another Hargreave portfolio that sits in the IMA UK Smaller Companies sector. Launched in October 2004, the fund has returned in excess of 206 per cent – more than 40 percentage points more than the much larger Marlborough Special Situations portfolio. Only four UK small cap funds have returned more over the period.
Performance of fund versus sector since launch
Source: FE Analytics
Marlborough UK Micro Cap Growth has a smaller-cap focus than the Special Situations fund, as well as the average UK Smaller Companies portfolio. It invests predominantly in the FTSE Small Cap (ex IT) index, and has 89 per cent of its assets in companies with a market cap of less than £250m. By contrast, Marlborough Special Situations has only 40 per cent in sub-£250m companies.
Among its largest holdings are semi-conductor manufacturer CML Microsystems and customer identity specialist GB Group.
Again, even though it’s got a smaller cap focus than its peer group, the fund has been less volatile since launch, protecting more effectively against the downside during down periods.
FE Research analyst Charles Younes (pictured) says Hargreave’s attitude to diversification is why the fund has been so successful on a risk-adjusted return basis.
“His funds aren’t dominated by one or two big positions – he has around the same weighting across the portfolio, meaning no one company is responsible for performance,” he said. “His Micro Cap fund has more than 200 holdings, so it’s very well diversified.”
“He also always has a little bit of cash on the side which I like, as this helps with liquidity.”
“Hargreave knows the small cap market better than anybody – every time a company is looking to raise money, they go to him,” Younes added.
The five-crown rated Marlborough UK Micro Cap Growth fund has a minimum investment of £1,000 and a TER of 1.52 per cent. It has a £106m AUM.
The manager also launched the Marlborough Multi Cap Income
fund in the middle of last year, which he co-manages with Siddarth Chand Lall. It’s made a good start, delivering 11.99 per cent compared to its sector’s 5.44 per cent.
The fund, which has already raised £178m, is a good option for investors looking to diversify away from the typical large cap UK Equity Income
portfolio. It’s predominantly a small to mid cap focused portfolio, in a similar mould to John McClure’s Unicorn UK Income
It’s currently yielding 4.42 per cent, has a minimum investment of £1,000, and a TER of 1.55 per cent.
Specialist investors may also be interested in the manager’s Hargreave Hale AIM VCT
, which targets long term capital growth by investing in a diversified portfolio of small caps primarily traded on the FTSE AIM index.
It’s currently on a discount of around 7 per cent, and is up 12.73 per cent over the last year, according to FE data.
The Marlborough UK Leading Companies and Marlborough UK Micro Cap Growth funds are both in the FE Select 100.