Going against the grain is uncomfortable but it can sometimes bring great rewards.
FE Trustnet looks at several funds with strong track records in three unfashionable sectors that have made money while the majority of investors were looking elsewhere.
UK All Companies
In December 2012, the IMA UK All Companies sector was the worst-selling among retail investors, the eighth month in a year that this was the case.
The very next month saw the UK market take off, with the average fund in the IMA UK All Companies sector returning 7.11 per cent in the year-to-date, much more than the fashionable IMA Global Emerging Markets, the best-selling sector in December.
Performance of sectors in 2013
Source: FE Analytics
This is not just a short-term phenomenon. While investors have been pouring money into UK Equity Income funds for their defensive qualities and Emerging Markets funds for growth, the IMA UK All Companies sector has beaten both over the past three and five years.
However, not only have many investors overlooked the sector, but when they do invest it is often through a low-cost tracker fund that aims to match rather than beat the return of the FTSE All Share index.
Data from FE Analytics shows that seven of the 14 funds in the sector that have attracted the most money in the past year are index trackers.
This means most investors have missed out on consistent top-quartile performers that have hugely outperformed the UK stock market and the emerging markets indices.
Juliet Schooling-Latter (pictured), head of research at Chelsea Financial Services, says that investors have been wrong to overlook the UK, and that there are some excellent funds that have consistently beaten the stock market. "One of my favourites is AXA Framlington UK Select Opportunities. You can’t beat Nigel Thomas, he’s got a lot of experience and an excellent long-term track record."
"Having somebody with his wealth of experience is what you are looking for," she added.
Data from FE Analytics shows that Nigel Thomas’ five crown-rated portfolio has significantly outperformed the FTSE All Share over three-, five- and 10-year periods.
Over the past decade the £3.3bn fund has made 295.47 per cent while its benchmark is up 173.17 per cent.
Performance of fund vs benchmark and sectors over 10yrs
Source: FE Analytics
"He invests across the market spectrum and tends to have a mid and small cap bias," Schooling-Latter said.
"He has a very low turnover in stocks and is a real long-term buy-and-hold investor."
Japan
This country has been a long-standing underperformer. A strong currency and a domestic economy that has been in decline since the early nineties have made funds that invest in the nation perform poorly over the last 20 years.
However, a number of heavyweight investors with strong records are overweight the country, which has had a good few months.
Over three months, data from FE Analytics shows that the average fund in the IMA Japan sector has made 14.81 per cent, the fifth-highest out of the 41 sectors.
The new government has changed monetary policy and is happy to create inflation, generally supportive of stocks and shares.
Some experts say that this is another false dawn for the country, and it is true that the TSE Topix stock market index is only 1.35 per cent up on where it was in March of last year.
Performance of index over 1yr
Source: FE Analytics
However, some of the biggest names in the fund management industry think that this time the recovery is the real deal.
The managers of the Ruffer Investment Company say it could soon begin reaping the rewards from 20 years of restructuring, in particular in the banking system.
FE Alpha Manager Hugh Young is overweight the country in his Asian portfolios.
Schooling-Latter said: "Japan is overlooked and you can see why. It looks like it might have turned the corner, though, and perhaps we are going to see some positive numbers out of it."
For exposure to the country, she likes Jupiter Japan Income and JOHCM Japan.
JOHCM Japan has doubled the returns of the TSE Topix benchmark over the past five years, making 40.99 per cent while the index has risen by 20.93 per cent.
The £262m fund has more exposure to mid cap stocks and to the financial and industrial sectors than its peers in the IMA Japan sector.
Jupiter Japan Income has produced returns more in line with the index, making 26.75 per cent over five years.
The £525m fund is currently yielding 2.5 per cent, according to data from FE Analytics, and it is the only fund in the sector with an income focus.
North America
"Our clients have less than 3 per cent in the US on average, even though it’s the biggest economy in the world and is, in my opinion, having a bit of a renaissance, partly due to the shale gas revolution," Schooling-Latter said.
"Not only are virtually all businesses going to benefit from cheap energy costs, but then you have the extra jobs it creates."
"It’s difficult to find funds that outperform, but we have AXA Framlington American Growth, which has outperformed quite a lot over five years."
Data from FE Analytics shows that the fund has made 59.78 per cent over the past five years while the sector has risen 45.72 per cent and the S&P 500 is up 51.81 per cent.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Managed by Stephen Kelly since 1997, the £634m fund has large positions in internet and consumer technology giants Apple, Google, IBM and Amazon.