Your favourite UK growth funds examined
The three most popular funds on FE Trustnet within this area have different strategies but are all positioned to take advantage of any lasting recovery.
By Mark Smith, Reporter, FE Trustnet
Monday April 30, 2012
Launched in 1969, this fund remains a firm favourite today and is the fifth most-viewed fund on FE Trustnet
Returns of 130 per cent over the last decade put it comfortably in the top-quartile and while it hasn’t shot the lights out over three or five years, Rob Morgan, investment adviser at Hargreaves Lansdown, says it is a great core holding for any portfolio.
"M&G Recovery is all about finding companies that have lost their way a little or have value that is not being recognised by the wider market."
has a very long average holding period and it has proved very successful as a long-term investment. The fund has a lot of history and many investors will have had it in their portfolios for decades."
The fund has just under £8bn assets under management and a TER of 1.65 per cent.
Morgan added: "M&G Recovery is a great fund to hold onto because of its international exposure. Dobell invests in miners and other stocks with exposure to wider investment super-trends like changing demographics in emerging markets or the increasing demand for commodities."
MFM Slater Growth
With just £56.6m assets under management, this sector-leading fund is overlooked by the majority of retail investors.
However being smaller than some of its mass-market competitors gives FE Alpha Manager Mark Slater
an edge in a highly saturated UK market, according to Morgan.
"It’s a nice, small and nimble fund and it can therefore make plays, delving deep into the small cap market where some of the other giants in the sector are not able to reach effectively," he said.
"Mark Slater has an excellent investment process and his record over the last couple of years has been fantastic, but before then performance struggled to take off. I think that the wider market has come to recognise the value in the kind of companies he holds so it’s been interesting to watch his style come into vogue."
Slater’s process centres around an analysis of earnings growth which he compares with price-to-earnings multiples. Strong cash flow, a robust balance sheet and low debt are also important qualities the manager looks for.
Our data shows it has returned 170 per cent over the last three years, more than any other fund in the sector. The fund lists Entertainment One, the company behind popular children’s TV character Peppa Pig, as one of its core holdings.
Fidelity Special Situations
It is rare to read an article featuring this £2.4bn fund that doesn’t make reference to the fact that a £1,000 lump sum invested when it was launched in 1979 would have been worth £144,000 when star manager Anthony Bolton handed over the reins to Sanjeev Shah
Since then it has been languishing in the doldrums. It has returned just 34 per cent in the last three years compared with 55 per cent from the average fund in the sector.
"This is a fund that continues to get a lot of attention as a lot of people still hold it from the Anthony Bolton days," said Morgan, who thinks it is unwise to write off the new manager.
"Sanjeev Shah is a contrarian manager and one of his big calls was to hold banks. This didn’t pay off last year and he got a fair amount of stick in the media."
"He’s also had some bad luck making plays on companies like Yell. Despite these shortcomings, I wouldn’t bet against him in rising markets."
Morgan added: "One consideration is that of the three managers mentioned, Sanjeev Shah is probably the most vulnerable to macro risks, especially holding onto the banks. But if you think the recovery is really starting to take hold then this is the fund to be in."