UK All Companies
The sector-leading performance of the Liontrust Special Situations fund has been particularly impressive among boutique houses over the last 12 months, while Unicorn Free Spirit is also highly rated. However, when it comes to consistency for risk-adjusted returns, few can match the £47m MFM Slater Growth fund.
Headed up by FE Alpha Manager Mark Slater, the fund has returned 167 per cent in the last three years, outperforming both its sector average and FTSE All Share benchmark by more than 100 per cent. It is the best-performing vehicle in the sector over this period – and by some distance.
Performance of funds vs sector over 5-yrs
Source: FE Analytics
Over one- and five-year periods the fund has returned 11 and 58 per cent respectively.
MFM Slater Growth has managed to achieve these impressive returns taking on only marginally more risk than the sector average. Over five years the annual volatility score for MFM Slater Growth is 19.46 per cent while the average fund scores 17.68 per cent.
Slater’s investment process focuses on the UK companies that he thinks are undervalued and have the potential for a significant re-rating.
UK Equity Income
This sector has come under fire recently for a lack of diversification. Many of the giants of the fund management industry appear in this sector, which gives boutique funds a serious advantage. With fewer assets under management they do not suffer the liquidity issues when it comes to investing further down the capitalisation spectrum.
FE Alpha Manager John McClure’s Unicorn UK Income fund has turned heads in the industry with its small cap focus. It has returned more than any other fund in the sector – 73 per cent – over three years, and has been consistently strong since it was launched in May 2004.
Fellow FE Alpha Managers Jan Luthman and Stephen Bailey’s CF Walker Crips Equity Income portfolio is also worth a mention. Returns have been strong over all periods and it has managed to achieve this with lower-than-average volatility.
Performance of funds vs sector over 5-yrs
Source: FE Analytics
However, the Trojan Income fund is the strongest all-rounder in this sector. Managed by FE Alpha Manager Francis Brooke, it has the highest returns of any equity income fund over one and five years, which it has achieved with an annual volatility score of just 11.36 per cent – the second lowest in the entire sector.
Managed sectors
There are a number of sector-leading funds run by boutique houses from the IMA's three managed sectors. In Cautious Managed, CF Ruffer Total Return stands head and shoulders above the rest. Over the last decade it has returned 157 per cent while its nearest rival, the Jupiter Merlin Income Portfolio, has returned 95 per cent.
In the Balanced Managed sector, McInroy & Wood’s Balanced and Income portfolios have performed impressively. However, for risk-adjusted returns there are few better than the Trojan and CF Miton Special Situations funds. Sebastian Lyon’s Trojan fund has returned 55 per cent over the last five years, compared with 7 per cent from the average Balanced Managed fund, with an annual volatility score of 8.43 per cent over the same period.
Martin Gray’s CF Miton Special Situations and Strategic Portfolios are the best all-rounders in this sector, however, due to consistently strong returns and the lowest volatility.
In the challenging economic environment, investors should value a fund’s ability to maintain capital in downturns and Gray has proved himself in this area time and time again.