The fund has been among the 10 best-performers in the IMA UK All Companies sector since Nigel Thomas took over in 2002, and one of the most consistent outperformers in both up and down markets.Although the fund had a disappointing 2012, which drags down its three-year numbers, Younes says it should perform well over the course of an entire seven-year cycle.
“The fund should perform well when growth companies come back into fashion following a recovery,” he said.
“However, the fund will tend not to be the best performing during short-term equity rallies, as Nigel is looking for long-term growth characteristics rather than present popularity.”
According to data from FE Analytics, the fund has returned 43.24 per cent over three years, compared with 35.76 and 28.77 per cent from its sector and benchmark, respectively.
The fund has slipped into the second quartile of the IMA UK All Companies sector over that time; however, it remains a top-quartile performer on a five- and 10-year view.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
Younes says the manager has retained his focus on quality growth companies, which should allow him to continue to outperform.
“The fund has a simple investment process that relies on the manager’s ability to pick the right UK growth companies,” he said.
“Thomas is one of the most experienced and talented managers currently operating in the UK, and is highly skilled at spotting both new economic trends and the relevant companies that can benefit the most from these over the long-term.”
“AXA gives him full freedom to run his portfolio as he likes. The fund’s excellent performance record has made it one of the most popular in its sector.”
“The manager has an impressive track record and since he began investing in UK-listed companies in 1986 there have been only seven times when he has failed to beat his benchmark over a calendar year,” he added.
“His strong focus on quality companies and aversion to financials and mining firms has allowed him to reduce risk compared with his peers.”
Younes explains that in recent months, the fund has been cutting risk.
“He has reduced his exposure to smaller companies, which should protect the fund from sharp losses, and still has little appetite for financials or mining companies as stocks in these sectors have experienced large price fluctuations over the past few years,” he said.
Whitechurch’s Ben Willis recently told FE Trustnet that the fund had been forced to change its strategy after it ballooned in size.
He says that while the manager still looks for the same stock characteristics, the fund used to be split relatively evenly between small, mid and large caps.
However, given that it is now £4.7bn, it is much more biased towards the larger end of the market.
Data from FE Analytics shows that 10 years ago, the fund stood at just over £200m but had reached £2.5bn by 2011.
Between 2004 and 2011 the fund was a top-quartile performer in the sector and comfortably outperformed the FTSE All Share, with returns of 112.44 per cent.
Since then the fund has still beaten the sector, but it has only been a second quartile performer.
This could suggest that size has affected performance to a certain extent, because 2012, when the fund had been on average £3bn, was the only calendar year when it failed to beat the sector.
However, Rob Bailey, head of UK wholesale distribution at AXA, disputes this.
“We do not have concerns over ‘capacity constraints’ as we closely monitor and review all of our funds at prescribed intervals,” Bailey said.
“With its low turnover, it is well suited to long-term investors and the fund has continued to outperform, even though it has been growing consistently over the 10-plus years that Nigel has been running it.”
Younes is also unconcerned by the fund’s size.
Willis still rates the portfolio, despite the fact that its make-up has changed.
“It may not be as dynamic as it was, but he has still done well and it is now more of a core holding,” Willis said.
Source: Trustnet Direct
The fund’s top holdings include ITV (5.8 per cent), GlaxoSmithKline (3.7 per cent), GKN (3.4 per cent) Wolseley (3.1 per cent) and Essentra (3 per cent).
It requires a minimum investment of £1,000 and has ongoing charges of 0.8 per cent.
