FE Alpha Manager Nimmo’s £1.1bn fund has returned 700.74 per cent since it was launched in 1997, beating the wider IMA UK Smaller Companies sector by 403.7 percentage points. Nimmo says that over that time, he has underperformed the sector in only four one-year periods, and in each case because other investors were buying junk.
"Our process is appreciated by our clients as our strategy is well defined. You can basically put us in a box and say this is what this fund does as it will perform certain ways in certain conditions," he said.
"You can see why. There have been four investment cycles in the life of the OEIC, the Asian crisis of the late 90s, the Gulf War and Enron scandal in the early 2000s, the banking crisis in 2008 and more recently the euro crisis."
"After each of those crises, we underperformed for a period."
Relative performance of fund vs sector since Jan 1997
Source: FE Analytics
The above graph shows Standard Life UK Smaller Companies’ relative performance against the sector since launch, showing the fund’s periods of underperformance and outperformance over that time.
It shows there have been four distinct periods where Nimmo underperformed relative to his competitors – 1998 to 2000, 2002 to 2005, 2009, and 2011 to early 2012.
All were periods of recovery in the market following a serious crisis.
Nimmo says that his style of investing in quality companies "with visible quality of earnings and balance sheet strength" means that that his fund should always beat the market over the long-term, but will underperform while markets recover after a crisis, when investors look for cheap stocks to make quick money.
The manager describes himself as a growth investor who is willing to run his winning holdings for an extensive period of time, looking to pick companies that have proven business models and recurring revenues.
He says this strategy means that his fund has delivered and will continue to deliver a dependability unrivalled by any of his peers in the IMA universe.
"You can see in the performance that there is nobody out there who is as consistent as this fund," he said. "I can see why people may disagree with that view, but I honestly think it is true."
"The underperformance will come as markets enter a recovery phase, however after that it will perform well again when investors focus on quality growth companies and turn away from cyclical or value names."
"I may be jumping the gun a bit here, but I think that sometime this year investors will revert back to quality growth companies. Everybody will realise that there is a recovery in the US economy and I will sit back and enjoy it," he added.
The manager has a heavy growth bias within his portfolios as he feels a value approach is too hit and miss, stating "high risk doesn’t mean high return".
"Investors find it hard to sell stocks when they are doing well, which is understandable. Perversely however, some investors are willing to buy stocks that are performing badly just because they are cheap – that is ridiculous to me," Nimmo said.
Nimmo likes to run his winners, and top-10 holdings such as ASOS, Telecom Plus and Aveva have been part of the portfolio for a long time. One of the best examples of this is the online retailer ASOS.
Nimmo bought the stock soon after it was listed on the London Stock Exchange in 2001 and the manager has since described doing so as by far his best ever investment decision.
He originally bought the stock at a share price of 80p, which he said wasn’t cheap at the time; however, he still actively buys ASOS at £39 as he says he 'still loves' the company and holds it in his investment trust and the recently launched Standard Life Global Smaller Companies fund.
Since the company was listed in October 2001, ASOS has returned a staggering 16,568.01 per cent.
Performance of stock since Oct 2001
Source: FE Analytics
Although Nimmo’s fund is soft-closed, it is available via fund platforms and has an ongoing charges figure (OCF) of 1.69 per cent.
Richard Troue, investment analyst at Hargreaves Lansdown, says that Nimmo is not far off the mark in his claim that he is the most consistent manager around.
"Nimmo does have a very good long-term track record," he said.
"That performance is driven to a certain degree by his stockpicking and his ability to hold those stocks for a long time, but also cutting stocks out of his portfolio that haven’t performed as well."
"I wouldn’t be able to say he is the most consistent manager around, but he has delivered reasonably consistent returns over that time."
"He is right in saying his fund will underperform when markets enter a recovery and investors buy more cyclical and lesser-quality businesses. However, when markets are flat he has done well through a combination of things."
"He likes reasonably valued companies that have good growth potential and a proven business model. These are not always the most exciting companies and that is why they might not bounce as high as lower-quality stocks when markets recover."
"It is a style we like and although his UK open-ended fund is soft-closed, we hold his Global Smaller Companies fund on our Wealth 150," he added.
The £92.7m Standard Life Global Smaller Companies fund was launched in January 2012. It has returned 32.54 per cent since then while the IMA Global sector has made 23.5 per cent.
The fund requires a minimum investment of £500 and has an OCF of 1.84 per cent.
