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Five funds making the most cash since the FTSE’s 2009 bottom

07 March 2015

FE Trustnet reveals the funds making you the most cash since the markets bounced back from the worst ever financial crisis.

By Daniel Lanyon,

Reporter, FE Trustnet

While a host of economic factors have only begun to normalise in the past year since the ravages of the financial crisis plunged half the world into recession, it’s been six years since equity markets found their bottom and settled after huge and swift losses.

As investors became fraught with concern over the health of the global banking system in 2007, the FTSE 100 – as a bellwether for broader financial conditions – began to tumble.

According to FE Analytics, between 9 October 2007 and 5 March 2009 it lost nearly 43 per cent of its value but as Federal Reserve chairman at the time Ben Bernanke warned that “aggressive” action was needed, the Bank of England quickly dropped the base rate to a historic low of 0.5 per cent and the market bottomed out soon afterwards.

In just 12 trading sessions after it bottomed out the FTSE gained 10 per cent and is in total up 145.04 per cent since the trough.

Performance of index over 8yrs

Source: FE Analytics

Since this point, of the five best performing funds in the entire Investment Association universe, four are UK equity focused and one deals in US stocks.

FE Alpha Manager Alex Wright co-manages the Fidelity UK Smaller Companies fund with Jonathan Winton, who joined the fund since 2013, and has the highest total return over this period.


The fund has made a whopping 445.33 per cent compared to an IA UK Smaller Companies sector average of 219.07 per cent and a gain in the fund’s index – the Numis Smaller Companies (ex ITs) – of 261.5 per cent.

Performance of fund, sector and index since 5 March 2009

Source: FE Analytics

The fund has demonstrated consistent outperformance. It is the only portfolio in the IA UK Smaller Companies sector to beat its 52 peers and benchmark in each of the last five full calendar years, suggesting Wright’s value/contrarian style has been successful.

However, the manager has become increasingly concerned about volatility around the UK general election on 7 May. He said last year that as a consequence he was looking for more global companies to alleviate this risk.

“I am balancing the fund with positions in larger, global companies, many of whom are trading at cheap valuations and could benefit from a change in perception. These include companies such as Shell, Wolseley and VW,” he said.

“In 2015 I will continue to avoid expensive sectors such as consumer staples, where valuations leave little room for error. One unloved sector which I do see positive change on the horizon is banking, where companies such as Lloyds and HSBC both trade at undemanding valuations and have attractive features which investors have not yet woken up to.”


Standard Life Investments UK Equity Unconstrained is next up, having made 437.84 per cent. The £1bn fund, managed by Ed Leggett, aims to buy up undervalued stocks when the market is doing poorly and wait for their medium-term cyclical appreciation.

Leggett’s strategy to scoop up higher risk and out-of-favour areas of the market has proved itself over the longer term, although the fund has seen material volatility particularly during the 2011 European sovereign debt crisis when it lost 33.94 per cent. The FTSE 100 lost just 12.36 per cent.

The £183m MFM Slater Growth fund, headed up by FE Alpha Mark Slater, is third best with a return of 398.62 per cent.

Like Leggett, Slater is a bottom-up stock picker who has a bias to mid-caps but also has several large and even mega cap stocks such as ITV and Walt Disney in his portfolio.

Both funds have made almost 2.5 times the IA UK All Companies sector’s average as well as the FTSE 100’s gain since March 2009.

Performance of funds, sector and index since 5 March 2009

Source: FE Analytics

Samantha McLemore’s $326.4m Legg Mason Opportunity fund is next up. It has made 373.40 per cent from North American equites, mostly in the US.

Only 13 per cent of funds in the IA North America sector beat the S&P 500 – which bottomed out a few days after the FTSE 100 in 2009 - over this period. The Legg Mason Opportunity fund was more than 100 percentage points ahead of its nearest rival.


Performance of fund, sector and index since 5 March 2009

Source: FE Analytics

McLemore is currently taking a high conviction bet on airline stocks, presumably with the belief that cheap oil will boost margins and drive demand.

American Airlines, Continental Airlines and Delta Airlines are the three largest holdings in the fund, making up around 16 per cent of the portfolio.

The Schroder UK Dynamic Smaller Companies fund has the fifth best return over the period in question. Two FE Alpha Managers Paul Marriage and John Warren head up the £568.2m portfolio although the latter joined in 2010 while the former has run the fund since 2006.

Despite its strong run over the period in question, the fund had a tough year in 2014, due to a generally bad time for small-caps which saw a significant sell-off.

The fund lost 8.81 per cent, a bottom decile performance in its IA UK Smaller Companies sector, partly exacerbated by some of Marriage’s largest holdings being hit hard and because of the portfolio is somewhat concentrated.

Some, such as Premier’s Simon Evan-Cook, have suggested the fund became too large after it saw its assets under management grow to around £1.3bn. Evan-Cook subsequently sold out having bought the then Cazenove UK Smaller Companies fund when it was just £40m in size.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.