Even if it’s not a major one, a dip could present a good buying opportunity for investors to pick up quality funds at cheaper prices.
Much like the IMA UK All Companies sector, which FE Trustnet previously covered as part of this series, there are a number of smaller cap fund managers who take advantage of these cheap prices and grow exponentially on the back of a correction.
Here we reveal five managers in the IMA UK Smaller Companies sector with a strong track record after markets have fallen.
Alex Wright
One of the best managers out there when it comes to roaring back after a correction is FE Alpha Manager Alex Wright, who heads up the four crown-rated Fidelity UK Smaller Companies fund.
The fund, launched in 2008, steamed ahead of its rivals during the recovery from the crash and in 2009 it delivered the highest returns of any fund in the sector, at 93.72 per cent.
Wright repeated his recovery performance in 2012, delivering top-quartile returns of 41.63 per cent that year, after a dip in the down markets of 2011.
The fund has held up well over the longer term, returning roughly 200 percentage points more than both the sector and Numis Smaller companies ex investment companies index over five years.
It has made 258.27 per cent since launch, more than doubling the returns of the sector and index.
Performance of fund vs sector and index since launch
Source: FE Analytics
The bad news for anyone who hasn’t already snapped up this fund is that it was closed to new money to protect the liquidity.
However, investors can get access to the manager through his Fidelity Special Values investment trust, which has a strong small and mid cap bias.
It has made 88.98 per cent since Wright took over in September 2012, compared with 27.78 per cent from the FTSE All Share over the period.
While Wright holds a number of FTSE 100 companies in the trust, he also invests further down the market cap and holds stocks such as Brewin Dolphin in his top-10.
The trust is trading on a discount of 4.1 per cent and has ongoing charges of 1.2 per cent.
Giles Hargreave
Another FE Alpha Manager with a long track record of outperforming his peers is Giles Hargreave.
His flagship Marlborough Special Situations fund has consistently beaten its peers over the longer term, and in more recent years the five crown-rated Marlborough UK Micro Cap Growth fund has performed even better, on the back of the recovery from a rough patch for markets.
Although the fund suffered a loss of 37.95 per cent in 2008, it roared back with returns of 59.7 per cent in 2009, ahead of the sector.
Hargreave’s noted stockpicking ability has made the fund one of the best in the sector over the last five years, with returns of 303.07 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.54 per cent.
Philip Rodrigs
FE Alpha Manager Philip Rodrigs has recently left Investec UK Smaller Companies to join River & Mercantile, but investors can access his smaller companies expertise through R&M UK Equity Smaller Companies, which he will take over from FE Alpha Manager Daniel Hanbury.
Rodrigs’ track record on the Investec fund is impressive and the portfolio has rallied strongly when markets have recovered from a crash.
In 2009, the fund made 70.76 per cent, ahead of both the sector and Numis Smaller Companies ex Investment Companies index. It also beat its peers in 2012, although it lagged behind the index that year.
The Investec fund gained 339.61 per cent in the five years prior to Rodrigs' departure, while the sector and index gained 212.5 per cent and 252.3 per cent, respectively.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
The R&M UK Equity Smaller Companies fund, which already boasts a five crown-rating, requires a minimum investment of £1,000 and has ongoing charges of 1.74 per cent.
Paul Marriage and John Warren
FE Alpha Managers Paul Marriage and John Warren also have a reputation for market-beating returns on their five crown-rated Cazenove UK Smaller Companies portfolio.
The £1.3bn fund outperformed its peers and the FTSE Small Cap index in both 2009 and 2012, following difficult years for equity markets.
The fund made 71.98 per cent in 2009 while the sector gained 50.18 per cent, according to FE Analytics.
The fund fell further than its peers in the crash year of 2008, shedding a painful 42.51 per cent; this was less than the index, however, which was down 48.32 per cent.
Cazenove UK Smaller Companies actually performed better than its peers and benchmark in 2011, picking up 1.21 per cent while the average fund in the sector suffered losses of 9.04 per cent.
The strong returns following down years have made the fund one of the best in the sector over the longer term.
It has made 442.08 per cent over five years while the sector has made 237.38 per cent. The index has gained 263.98 per cent over this time.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Unfortunately the fund is now hard-closed.
