The Marlborough UK Micro Cap and Marlborough Nano Cap funds are both top quartile since the sell-off began, despite investing in the very smallest companies in the country, supposedly more volatile and less liquid.
A number of AIM-focused funds have also produced some of the top results in the sector, despite the worse performance of that high-growth market.
Data from FE Analytics shows that the Marlborough Nano Cap Growth fund has lost just 1.59 per cent since the sell-off began on 10 March, while the average fund in the sector is down 5.54 per cent. Marlborough UK Micro Cap Growth is down 2.61 per cent.
Performance of funds vs sector since 10 Mar
Source: FE Analytics
Both funds are run by FE Alpha Manager Giles Hargreave and Guy Feld, joined on the Nano Cap fund by David Walton.
The latter was closed shortly after launch due to strong demand and is currently £98.5m in size. The £407m Micro Cap fund is still open and is on the FE Select 100 list of the country’s best funds.
Rob Gleeson, head of FE Research, says that the highly diversified nature of the portfolio helps it to regularly outperform in down markets.
“Over the last quarter, the Marlborough UK Micro Cap Growth fund has once again shown its capacity to differentiate from its sector peers,” he said.
“The fund has a very good capacity to protect from downside due to the manager’s investment approach: the portfolio is highly diversified across 225 holdings,” he added.
“Over the last three years, the fund participated in 71 per cent of the downside. Over the last year, the fund did even better as it only participated in 34 per cent of the downside.”
“Additionally, due to its investment approach, the manager did very well in cashing its profits early.”
“It has proven its strength particularly in down markets. On a year-to-date basis, the fund has largely outperformed its sector peers.”
Marlborough Nano Cap Growth has a similar approach, with 137 holdings in the fund and only one worth over 2 per cent. It invests in companies below £100m in market cap. The Micro Cap fund goes up to £250m and has 255 holdings.
Both funds have their largest sector weightings in technology, which makes their outperformance during this period particularly notable: technology was one of the areas worst hit this spring.
The list of the top performers during this period also includes the Cavendish AIM fund, down 2.05 per cent, and the CF Miton UK Smaller Companies fund, which focuses on AIM stocks and is down 2.32 per cent.
Performance of funds vs sector and index since 10 March
Source: FE Analytics
The £33m Cavendish AIM fund has been run by Paul Mumford since launch in October 2005.
Mumford is another to run a highly diversified portfolio, which he cites as being a major reason for his success.
Mumford says that this approach allows him to neuter the effects of a blow-up in a particular stock on the volatile AIM market.
The manager has also benefitted from avoiding the largest stocks on AIM, a number of which have exploded spectacularly in recent months.
Quindell and ASOS were both darlings of the market and hugely popular with retail investors as AIM soared prior to the crash.
However, both have been clobbered, with ASOS down over 50 per cent this year and Quindell down almost 60 per cent since March.
Performance of stocks vs index in 2014
Source: FE Analytics
The £175m CF Miton UK Smaller Companies fund was launched by Gervais Williams and Martin Turner in late 2012.
It was a major beneficiary of the rally in AIM last year, rising 41.02 per cent between August and January, putting it at the top of the rankings over a year. However, our data shows it has managed to hold onto its gains since the AIM market slumped in March.
The fund has 88 holdings, 62.3 per cent of which are in the FTSE AIM market. As well as good stock selection it has also benefitted by building up its cash pile to 15 per cent of the fund.
Data from FE Analytics shows that Hargreave’s success is in part thanks to the judicious use of cash as well.
The fund’s weighting increased from 3.3 per cent at the turn of the year to 10.9 per cent at the beginning of February and 11.6 per cent at the start of April.
This means the managers perfectly timed their profit-taking as the sell off began at the start of March.
