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Five top-rated funds you’ve never heard of but are shooting the lights out

06 August 2015

FE Trustnet looks at some of the smaller portfolios in the less popular sectors that have slipped under the radar of most investors but hold our top crown rating, have an FE Alpha Manager at the helm and have made top quartile returns over three years.

By Daniel Lanyon,

Senior Reporter, FE Trustnet

Often it has been the right decision to invest in some of the most popular and well-known names in the fund management industry who have justified their ‘star status’ with long-term outperformance.

But due to their popularity, leading open-ended funds can grow in size to the extent where they close or underperform in many cases, as a recent FE Trustnet study found. These ‘super tanker’ funds are not always the great place to park your cash as they once were.

Using our quant-driven FE Crown Fund Rating system and FE Alpha Manager awards allows us to isolate top-performing portfolios regardless of size and visibility. It is easy to see that there are many quality funds – often headed by some of the most respected fund managers – that are still flying under investors' radars. 

Here we take a look at five funds that all currently have five FE Crowns, an FE Alpha Manager running the portfolio and have seen top quartile returns over the past three years, but are still below £100m in size.

 

Guinness Global Money Managers

At just £7m this fund is one of the smallest in the IA Global sector and yet its three-year returns are the second highest. It has returned 95.54 per cent, putting it way ahead of the sector and benchmark.

Performance of fund, sector and index over 3yrs


Source: FE Analytics

The fund, co-managed by Tim Guinness and FE Alpha Manager Will Riley, is fairly unusual in that it only invests in the shares of listed fund management groups themselves and has an equally weighted portfolio of about 30 stocks. Holdings include the likes of Liontrust, GAM and Rathbones.

The fund has a clean ongoing charges figure (OCF) of 1.24 per cent.

 

First State Emerging Markets Bond

Both fixed income and emerging markets have been largely out of favour for a few years and it is fair to say investing in the debt of the world’s fastest growing countries that make up the asset class has never found a huge amount of favour with UK investors.

However, this £96m portfolio from a titan of emerging market investing has managed to return a 6.08 per cent profit over three years when two-thirds of funds in the sector lost money.


 

Performance of fund, sector and index over 3yrs


Source: FE Analytics

Headed by FE Alpha Manager Helene Williamson, the fund did particularly well during the 2011 taper tantrum, falling much less than its peers and bouncing back more quickly. It has also done well this year, which owing to mounting concern in the fixed income space has been a rocky ride for bond funds.

It is currently top quartile in 2015, which it has been in three out of the last four calendar years, the exception being 2014 when it was second quartile.

The fund has a clean OCF of 0.95 per cent.


Marlborough Extra Income


The £46m Marlborough Extra Income fund doesn’t get the attention of its more famous stablemates run by FE Alpha Manager Giles Hargreaves. It has tripled in size over the past few years but owing to a rapid injection of cash in 2014, rather than steady flows.

The fact that FE Alpha Manager Nigel Beidas and Matthew Rainbird’s portfolio sits in the IMA Equity & Bond Income sector may go some way to explain why this fund is often overlooked by investors. 

It has done extremely well over the managers’ tenure, returning 44.04 per cent over three years as the average fund in the sector has made just 29.96 per cent. 

Performance of fund, sector and index over 3yrs


Source: FE Analytics


It holds just 24 per cent of assets in bonds, with the majority of this in the UK bond space, and it has a large number of holdings, 126 in total.

The fund has a clean OCF of 0.88 per cent.

 

PFS Somerset Emerging Markets Small Cap

Emerging market stocks have rebounded following a tough few years relative to developed markets but the average fund in the sector is still marginally down over three years.

The PFS Somerset Emerging Markets Small Cap fund is headed by FE Alpha Manager Mark Asquith and has outperformed over three years, returning 11.47 per cent while most funds in sector lost money.

Performance of fund, sector and index over 3yrs


Source: FE Analytics

Unusually for a small cap fund it has also given investors a smoother ride compared to its large cap focused counterparts, clocking up the lowest volatility over three years in the 68-strong sector. FE Trustnet took a closer look at this fund earlier today.

It has a clean OCF of 1.75 per cent.

 

Consistent Practical Investment

FE Alpha Manager Sean Ashfield has run this portfolio, which sits in the IA Mixed Investment 40%-85% Shares sector, since 2009.

While its more recent performance has been average, longer term it has some of the highest returns in the sector and it top quartile for annualised volatility, alpha generation and maximum drawdown.


Over the past three years it has generated a top quartile return of 44.04 per cent, the eighth best in the sector of 114 funds.

Performance of fund, sector and index over 3yrs


Source: FE Analytics

Unlike most of its peers, it invests largely in other funds and trusts such as Merchants Trust, Aberforth Geared Income, BlackRock Income Strategies and Temple Bar.

The fund has a clean OCF of 1.15 per cent.

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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.