The Investment Association’s Unclassified sector includes a number of funds that either do not want to be classified in other sectors or have been removed from other sectors for non-compliance.
However, are investors missing out if they are avoiding the overlooked sector?
Among the private and pension funds are a number of funds that have fallen out of the IA’s other sectors or exist outside of them for one reason or another.
While the size of the sector is not disclosed by the IA, it includes a number of large institutional funds as well as many smaller retail funds. There are 860 funds in the sector, making it one of the largest in terms of members.
Among the sector’s best performers in 2016 is the St James’s Place Wealth Management’s £245.2m SJP North American fund, managed by Aristotle Capital Management, with a return of 35.39 per cent.
US manager Aristotle has managed the three crown-rated fund since June 2011 under chief investment officer Howard Gleicher.
Aiming to provide capital appreciation over the medium-to-long term through investment in a portfolio of North American equities, the fund provides access to a manager not usually available to UK retail investors.
SJP North American fund vs IA North America sector YTD
Source: FE Analytics
Another top-performing fund among the St James’s Place stable is the £79m SJP Global Smaller Companies fund, which is up by 24.66 per cent.
Managed by Australian firm Paradice Investment Management and overseen by portfolio manager Kevin Beck, the fund’s highest exposure is to North American stocks and large cash & fixed interest weighting.
Paradice’s global equity team invests across the global small- and mid-cap space, capitalising on strong businesses trading at substantial discounts to the team’s in-house valuation.
Elsewhere, the £8.1m SVS Church House Deep Value Investments fund has delivered a strong double-digit performance in 2016.
Returning 18.77 per cent this year, compared with a 6.73 per cent gain for the IA UK All Companies sector, where funds with a comparable investment focus can be found. (The fund can allocate up to 30 per cent of the portfolio in overseas-listed companies).
Managed by Jeroen Bos, the fund invests in a concentrated portfolio of 20 to 25 stocks exhibiting ‘deep value’ characteristics.
SVS Church House Deep Value Investments vs IA UK All Companies sector YTD
Source: FE Analytics
The fund’s largest sector weighting is to financial stocks, which make up 30.1 per cent of the portfolio. It also has large weightings in the industrial, consumer discretionary and energy sectors, according to its most recent factsheet. With its deep value bias, much of the fund portfolio is invested in AIM stocks and UK smaller companies.
Away from conventional investment strategies, the Way Green Portfolio has emerged as a solid performer this year, despite concerns over the future of international commitments aimed at reducing climate change.
Despite a tricky start to the year, the four crown-rated, environment-focused £5.5m fund has generated a 16.04 per cent gain in 2016, following its strategy of thematic investment in businesses showing a consistent approach to sustainable operations and protecting the environment.
The fund of funds invests in strategies managed by a number of industry peers “that have demonstrated commitment, experience and a proven track record in this sector”. Main themes in the fund include water and increased efficiency, representing the highest sector exposures.