While some funds have stood the test of time and built up long track records of outperformance, investors are always keen to spot the next big thing – but this often means looking at funds that have a short track record. 
We’ve published a number of articles recently looking at the very best longstanding fund managers but in this one we’re turning our attention to the funds whose relative youth and low assets under management mean they are overlooked by most – for now.
Adrian Lowcock (pictured), head of investing at AXA Wealth, recently told us: “I believe in building a core portfolio around experienced proven managers but support this with access to some new rising stars who one day may replace the veterans of the industry – after all it is these guys who will still be running money when I retire.”
To identify funds that might be worth looking into further, we filtered for those that were launched within the last three years and have achieved first quartile returns over at least the past year.
This was narrowed down by screening for portfolios that still have assets under £300m but, knowing investors feel more comfortable with some company, have managed to attract more than £50m.
This additional filter means that some of the more high profile fund launches of recent years won’t be included in this article. Neil Woodford’s CF Woodford Equity Income, for example, already has assets of £6.7bn and is on the radar of pretty much every investor.
In fact, those looking for UK exposure in general may be disappointed, as none of the sectors’ members have made it onto the final list. However, there are funds covering a wide range of geographic locations that seem to tick all the boxes.
Global funds
The IA Global sector is one of the most obvious places for a UK investor to diversify their equity portfolio although, as we’ve mentioned before, it can be a challenging hunting ground for strong active managers.
There are two members of the peer group that made it through our filters: Carmignac Ptf Investissement, which launched in November 2013, and FF&P Global Select Equity, which opened for business in December 2012.
Carmignac Ptf Investissement is headed by FE Alpha Manager Edouard Carmignac and has outperformed its sector and benchmark since launch with a 25.68 per cent total return. It focuses on large-caps, with the likes of Novo Nordisk, Amazon, Google and ICIC Bank counted as top 10 holdings.
Unlike many global funds, it has a decent weighting to emerging markets; they make up 22.88 per cent of the portfolio with by far the largest allocation being to Asian equities. Emerging markets have been under pressure, but the fund has seen this offset by the strength of its US holdings, especially those in the financials and technology sectors.
FF&P Global Select Equity has made 52.44 per cent since inception. The fund aims to outperform the MSCI World index over the market cycle, through building a concentrated portfolio of quality, reasonably-valued stocks.
In recent months, the fund has been building exposure to Japanese and European equities, taking its Japan allocation to its maximum allowed. It has done this by significantly reducing its US weightings from an 8 per cent overweight to a 1 per cent underweight.
Performance of funds vs sector and index over 1yr
Source: FE Analytics
Emerging market funds
Although emerging markets have fallen out of favour with investors over recent years, a well diversified portfolio should have exposure to the asset class and the huge growth potential it offers.
One recent launch from the IA Global Emerging Markets sector is in the first quartile over one year and that’s the SJP Emerging Markets Equity fund, which launched in April 2014 but is only available to clients of St James’s Place.
The fund is managed by Ajay Krishnan and Roger Edgley of Utah-based Wasatch Advisors. The managers have a ‘go anywhere’ approach that sees the managers look past traditional markets like China and has led them to hold positions in Peru, Thailand, Egypt and Indonesia during their careers.
Investors wanting more specialised exposure will find that one launch in the IA Asia Pacific ex Japan sector has established an early track record. Andrew Swan and Emily Dong’s BlackRock Asia Special Situations fund has made a first decile 20.66 per cent since launch in April 2014, as well as over the challenging conditions of 2015 to date.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
The managers construct a concentrated, high conviction and high alpha portfolio of 30 to 60 stocks, aiming to identify companies that could be market leaders of the future regardless of their current benchmark weighting. Its top holdings are AIA Group, Tencent Holdings and Samsung Electronics, with the biggest sector overweights to financial and information technology.
Investors wanting an even more focused approach and exposure to the world’s second largest economy could look at New Capital China Equity, which was launched in August 2012 by FE Alpha Manager Mansfield Mok.
It’s made 54.22 per cent since launch, compared to the 33.65 per cent average gain from the IA China/Greater China sector and the 31.74 per cent rise in the MSCI China index. However, it has been hard hit by the China A share sell-off this year and the peer group’s worst performing fund over three months after losing 20.71 per cent.
In his latest update, Mok told his investors: “We are cautiously optimistic on the China equity market on a 12-month view. Our fund is well positioned for the uptrend with substantial exposure to the undervalued SOE reform candidates and non-bank financials. We have also identified a few niche companies in both A share and Hong Kong markets and plan to build up positions on pull-back.”
US funds
The US is a notoriously difficult market for active managers to outperform in, leading many to take an index-tracking approach when seeking exposure to the world’s biggest economy. However, some funds have crafted strong track records.
Our data shows that Natixis Loomis Sayles US Equity Leaders has outperformed the IA North America sector and the S&P 500 since launch in April 2013 with a 42.11 per cent rise. The sector has gained 34.25 per cent over this time while the index is up 35.17 per cent.
The fund, which is managed by Aziz Hamzaogullari, has kept up this outperformance over more recent time frames; over 2015 so far it’s made 7.45 per cent, which is some 5 percentage points more than the S&P 500 and its average peer.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
Hamzaogullari takes a private equity approach to investing, aiming to find high-quality companies that have a competitive advantage and profitable growth, but are trading at a significant discount to value. His high conviction portfolio is currently topped by Amazon, followed by Facebook, Cisco Systems and Oracle.
