The likes of Harry Nimmo’s Standard Life Investments UK Smaller Companies fund are among the best performing UK smaller companies funds in 2015 so far, according to research by FE Trustnet.
Over the longer term, putting money into UK smaller cap equities has been a pleasing exercise compared to large-caps.
In 2015 so far this trend has been very acute with the FTSE Small Cap index tripling the gain of the FTSE 100, which has risen just 3.5 per cent. This has provided rich pickings for many funds in the IA UK Smaller Companies sector.
Here we take a look at the four funds that have doubled or nearly doubled the gains the FTSE Small Cap index has made in 2015 so far.
MFM Techinvest Special Situations
First up is this relative minnow of the sector, which has returned a whopping 22.3 per cent since the start of the year. At £3.6m it is one of the smallest funds in the sector but its returns are top of the tables in 2015.
Over the longer term the picture is not so rosy. Co-managed by Conor McCarthy and Darren Freemantle for the past decade, the fund is the worst performer over 10 years despite nearer term outperformance.
However, it is top decile over one year and has just outperformed the FTSE Small Cap index’s 72.45 per cent gain over three years.
Top holdings such as Fulcrum Utility Services and Best of the Best have been decent drivers of returns, having both more than doubled since the start of the year.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
The fund has a clean ongoing charges figure (OCF) of 1.77 per cent.
Franklin UK Smaller Companies
At just £160m this fund is also one of the more nimble portfolios within the IA UK Smaller Companies sector. This has presumably only been a boon to performance with the portfolio up 18.17 per cent since the start of the year.
Paul Spencer and Richard Bullas have headed the fund since June 2012. Over the past three years it is up 102.94 per cent, putting it in the sector’s top decile for returns. The sector average was 70.64 per cent while the index gained 72.45 per cent over this period.
Adrian Lowcock, head of investing at AXA Wealth, backs Franklin UK Smaller Companies. He told FE Trustnet recently that the three years’ tenure of the two managers has turned around the fortunes of the portfolio, following a prolonged period of underperformance under previous manager Stuart Sharpe.
“Bullas and Spencer are pragmatic managers with a three-pronged approach: the backbone of the fund is composed of high quality, steady growth companies. These are complemented by under-appreciated and undervalued companies,” Lowcock explained.
He added: “The final prong is recovery stories which tend to be more cyclical in nature.”
It has a clean OCF of 0.84 per cent.
Scottish Widows HIFML UK Smaller Companies Alpha
At just £10.4m, this fund is again one of the smallest in the sector but it has also had a great run. It has seen only four negative months in terms of returns since equity markets bounced back in March 2009.
The fund is second quartile over five years with a gain of 126.51 per cent compared to 96.04 per cent from its average peer.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Led by the pan-European equity team at Scottish Widows, it has kept a fairly consistent overweight of about 35 per cent to industrials over the past three years with the next biggest bet in the services sector.
Its largest holdings include XP Power, RPC Group and Wilmington.
It has a clean OCF of 1.78 per cent.
Standard Life Investments UK Smaller Companies
Last up is a portfolio headed by one of the most well-known smaller companies fund managers – Harry Nimmo, whose torrid 2014 has been contrasted with a much, much better 2015.
Nimmo’s £1bn fund lost 8.54 per cent in 2014 but this year it has rebounded with force and is up 16.76 per cent.
Underpinning Nimmo’s portfolio strategy is a belief that the UK economy is making good progress in its recovery and that falling commodity and energy prices will be a huge boost to consumption.
“We continue to expect the recent weakness in commodity prices to boost consumer real incomes to the benefit of smaller companies’ profitability,” he said.
“The UK economy continues to make good progress, and we are finding attractively valued companies with strong fundamental businesses which fit our criteria.”
“Those able to control their own destinies to the benefit of earnings growth whatever the backdrop are of particular appeal.”
Over the longer term Nimmo has significantly outperformed his peers. The fund is the fifth best over 10 years, having put a 275.62 per cent return in investors’ pockets.
Performance of fund vs sector and index over 10 years
Source: FE Analytics
The fund has a clean OCF is 1.69 per cent.