Tim Wilson recently said investors should prepare to buy on the back of a major fall in share prices.
With this in mind, FE Trustnet looks at five managers in the IMA UK All Companies sector with a strong track record of bouncing back from down markets.
Ed Legget
One of the best-performing funds on the back of corrections, according to data from FE Analytics, is the Standard Life UK Equity Unconstrained fund, managed by Ed Legget.
Not only was the fund the best-performing portfolio in the sector in 2012, it also came back strongly on the back of the 2008 financial crisis, delivering top-quartile returns of 99.17 per cent in 2009. The sector made just 30.4 per cent that year.
It is worth noting the fund fell further than the sector in both 2008 and 2011 – shedding 41.05 per cent and 20.47 per cent respectively in each 12-month period.
However, the fund’s long-term track record is still strong. Standard Life UK Equity Unconstrained has made 418.43 per cent over the last five years, nearly three times as much as the IMA UK All Companies sector.
Although the fund has no benchmark, as a point of comparison it also nearly tripled the returns of the FTSE All Share over the period.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Even if you include the fund’s brutal 2008 number, it is still well ahead of both the sector and index, delivering 322 per cent since September 2005.
The sector has made 81.25 per cent over this time while the FTSE All Share has gained 78.18 per cent, according to FE Analytics.
The fund tends to be invested in more cyclical stocks and is tipped toward industrials as the highest sector allocation. Cut-rate airline easyJet, one of the top-performing FTSE 100 stocks last year, sits in Legget’s top-10 holdings, as does out of favour miner Rio Tinto.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.9 per cent.
Nick Kirrage and Kevin Murphy
By definition, the £549.8m Schroder Recovery fund invests in down-and-out companies where negative news has knocked the price down to bargain levels.
The fund sifts through these cheap companies for the ones that are unfairly valued, a strategy that has worked well on the back of a correction.
The portfolio, headed up by Kevin Murphy and Nick Kirrage, rallied strongly in the market recovery from the 2008 financial crash and once again in 2012 as it rebounded from the eurozone crisis, picking up top-quartile returns of 49.18 per cent and 34.05 per cent respectively.
The fund also protected better than its peers in 2008, losing 27.11 per cent while the sector tumbled 31.96 per cent.
However, the fund does not target capital protection and, as illustrated by its bottom-quartile returns in 2011 when it lost 14.1 per cent, investors should not expect it to outperform on the downside.
Like the Standard Life fund, Schroder Recovery also has a stellar long-term track record.
The fund has returned nearly 100 percentage points more than the sector and index over the last five years, picking up 252.03 per cent.
The fund has made 138.52 per cent since Kirrage and Murphy took over in July 2006, while the sector gained 67.33 per cent. The FTSE All Share gained 64.35 per cent over the period.
Performance of fund vs sector and index since 2006
Source: FE Analytics
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.51 per cent.
Richard Buxton
Legendary UK equity investor Richard Buxton only took over the four crown-rated Old Mutual UK Alpha fund in June last year; however, the manager has a long track record of delivering strong returns in rising markets.
After a long stint at Schroders, his flagship Schroder UK Alpha Plus fund managed top-quartile returns in both 2009 and 2011, following two of the worst financial years in recent history.
The fund did fall further than its peers in both 2008 and 2011; however, its long-term track record remains solid.
The Old Mutual portfolio has been slightly ahead of the sector since Buxton took over and has nearly doubled the gains of the FTSE All Share, with returns of 13.39 per cent.
Performance of fund vs sector and index since June 2013
Source: FE Analytics
Buxton has been bullish about equity markets over the last several years. In a recent interview with FE Trustnet, he went so far as to say he was gearing up for a 15-year bull run in equities.
Hugh Sergeant
A lesser-known name that has fared well in the aftermath of down markets is the tiny £173.7m R&M UK Equity Long Term Recovery fund, managed by Hugh Sergeant.
Much like the other funds on this list, it delivered top-quartile returns in 2009 and 2012 but has wallowed in the bottom quartile when markets have headed south.
Investors who kept the faith through the dark times have been rewarded, as the fund has beaten the sector and index over the last one, three and five years.
The fund has made 150.91 per cent since launch in July 2008, more than doubling the returns of the sector and index.
Performance of fund vs sector and index since 2008
Source: FE Analytics
The manager is backing the banks in a big way, with financials making up the highest sector weighting in the portfolio.
HSBC, Lloyds, Barclays and Royal Bank of Scotland are all in his top-10 holdings, as are miners Rio Tinto and Anglo American. The fund also has exposure to BP in its top bets.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.89 per cent.
Mark Costar
The four crown-rated JOHCM UK Growth fund, run by FE Alpha Manager Mark Costar, has a tendency to bounce quickly on the back of down markets, delivering top-quartile returns in 2009 and 2011.
Like the Schroder Recovery portfolio, Costar’s fund also protected better than its peers in 2008, sustaining a loss of 23.34 per cent. However, it underperformed its peers in 2011, losing 17.39 per cent.
The knocks weren’t enough to hold the portfolio back: it is a top-quartile performer over one, three, five and 10 years.
The fund has made 180.31 per cent over the last decade, compared with 127.68 per cent from the FTSE and 124.92 per cent from its sector.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The manager holds a mix of cyclical stocks in his top-10, including BP and Royal Dutch Shell, which both lagged behind the FTSE last year, and International Consolidated Airlines Group (IAG), which was the best performing stock in the FTSE 100 in 2013.
The fund requires a minimum investment of £1,000 and has a total expense ratio of 1.33 per cent.
