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Three top-performing funds for growth investors to consider

09 February 2017

FundCalibre’s Juliet Schooling Latter highlights funds for those wanting to add some growth to their portfolio.

By Gary Jackson,

Editor, FE Trustnet

Baillie Gifford Global Discovery, Marlborough UK Micro Cap Growth and Rathbone Global Opportunities are some of the funds that investors looking for growth strategies could consider adding to portfolios, according to analysts at FundCalibre.

The relative performance of the growth and value styles of investing have garnered much attention in recent months. Growth has outperformed value over the past few years but a market rotation in recent months has seen value come to the fore.

Performance of indices over 3yrs

 

Source: FE Analytics

However, FundCalibre research director Juliet Schooling Latter says that investors should have exposure to both styles within their portfolios and the recent outperformance of value doesn’t necessarily mean that growth funds are doomed.

 “Quality growth funds have been very popular with investors for some years now, particularly as growth of any kind and income at a decent level has been increasingly hard to find,” she said.

“With a good manager behind them, growth funds should continue to do well, no matter what the economic climate, and we think they make good core holdings in a portfolio.”

In the following article, we look at three growth funds that Schooling Latter thinks investors should consider holding.

 

Baillie Gifford Global Discovery

This £238.5m fund has been headed up by FE Alpha Manager Douglas Brodie since May 2011. Over this time, it has produced a 125.24 per cent total return and outperformed the average IA Global fund by close to 60 percentage points.

Performance of fund vs sector under Brodie

 

Source: FE Analytics

The fund’s strong outperformance is partly down to its area of focus – it invests in global small-caps, which have the potential for much higher growth rates than their large-cap peers. Current holdings include e-trading platform MarketAxess, consumer robot company iRobot and intellectual property IP Group.


“Renowned for the quality of its in-house research, Baillie Gifford brought its small-cap teams together in 2011 to form the global discovery team,” Schooling Latter said. “This fund consists of what the team believe to be the most innovative and fast-growing companies in the world.”

The portfolio’s small-cap bias has resulted in a top decile maximum gain of 45.78 per cent over Brodie’s tenure. However, the fund is also in the sector’s bottom decile for annualised volatility (at 16.20 per cent) and has been hit by a higher maximum drawdown than its average peer.

This fact has led to FundCalibre to say that the fund “is perhaps not for the faint hearted”, but it has “richly rewarded” investors in the past – although this is no guide to future performance.

Baillie Gifford Global Discovery has a clean ongoing charges figure (OCF) of 0.78 per cent.

 

Marlborough UK Micro Cap Growth

FE Alpha Manager Giles Hargreave has managed this £676.2m fund since its launch in October 2004 and was joined on the portfolio by Guy Feld in February 2012. As its name suggests, the portfolio is made up of companies with a market cap below £250m at the time of purchase.

Since inception, Marlborough UK Micro Cap Growth has made a 534.61 per cent total return – ranking it second in the IA UK Smaller Companies sector, where the average return has been less than half this at 253.15 per cent. The fund is also ahead of its average peer over one, three and five years.

Performance of fund vs sector since launch

 

Source: FE Analytics

“This is a small-cap growth fund managed by the renowned Hargreave Hale team,” Schooling Latter said.

“The fund is highly diversified and invests in firms with disruptive technologies or companies who are leaders in niche markets. The managers use their vast array of industry contacts and their own team to uncover the best new ideas.”

Industrials is the portfolio’s largest sector bet, accounting for 25.4 per cent of assets, with technology (22.5 per cent) and consumer services (17 per cent). Its top holdings are advanced PC-based gaming platform designer Quixant, premium beverage firm Fevertree Drinks and digital communications group Next Fifteen Communications.

Marlborough UK Micro Cap Growth has a 0.80 per cent clean OCF and is yielding 0.73 per cent.

 

Rathbone Global Opportunities

Last up is this £923.8m fund, which has been headed up by James Thomson since November 2003. Sammy Dow was appointed deputy manager in September 2014.


Rathbone Global Opportunities’ 413.54 per cent total return makes it the IA Global sector’s third best performer since Thomson took over. It is also beating its average peer over three- and five-year periods.

Performance of fund vs sector and index under Thomson

 

Source: FE Analytics

The fund was hit hard by the financial crisis, make a bottom-decile loss of 39.39 per cent in 2008. This prompted Thomson to overhaul the investment process and add core defensive bucket of reliable growth stock, which help to “weather-proof” the portfolio and reduce its volatility.

“Rathbone Global Opportunities is a global growth fund looking for simple, scalable businesses with entrepreneurial and flexible management teams,” Schooling Latter said.

“James Thomson has a contrarian philosophy, investing in undiscovered or out-of-favour growth companies. He believes there is a bias against growth companies, because the majority of active funds are value driven.”

The portfolio has the US as its biggest geographical weighting at 55.7 per cent of assets, followed by Europe ex UK at 23.9 per cent and the UK at 15.4 per cent. Its top holding is Amazon.com, followed by Facebook and pan-European investment group Aurelius.

Rathbone Global Opportunities has a clean OCF of 0.80 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.