Manager returns are one of the key features on the FE Trustnet homepage, and a closer look will reveal that Nimmo, who heads up Standard Life UK Smaller Companies, Standard Life Global Smaller Companies, and the Standard Life UK Smaller Companies Trust, finds himself near the top of the pile over all four time periods.
Nimmo is number-one over five years, with returns of 88.4 per cent, third over seven and 10, and fourth over three.
Performance of manager over 10-yrs
| Name | 3yrs (%) | 5yrs (%) | 7yrs (%) | 10yrs (%) |
|---|---|---|---|---|
| Harry Nimmo | 75.3 | 88.4 | 148.7 | 437.8 |
Source: FE Analytics
Inevitably, the stellar performance of the UK small cap market has aided Nimmo’s returns, but it is interesting to note that only one other UK small cap FE Alpha Manager – Investec’s Philip Rodrigs – appears in the top-five list over more than one time-frame.
The only other managers who appear in two of the four time-frames are First State’s Angus Tulloch and Martin Lau, who head up the multi-billion pound Asia Pacific Leaders and Greater China Growth portfolios. The pair take the first and second spot respectively over 10 years.
Top-five FE Alpha Managers over 10yrs
| Name | 10yr returns (%) |
|---|---|
| Martin Lau | 766.9 |
| Angus Tulloch | 449.6 |
| Harry Nimmo | 437.8 |
| James Donald | 428.7 |
| David Dudding | 409.4 |
Source: FE Analytics
In an exclusive interview with FE Trustnet, Nimmo (pictured) pointed to the strong performance of the small cap market as a big contributor to his success. "I’m very happy to hear I’m consistently up there – UK smaller companies have been a very good place to be," he said. "It certainly hasn’t been a lost decade for us managers."
"I wouldn’t be surprised if you went a little further down the list then you’d see a few others pop up."
However, Nimmo says he could not have done it without stringent, bottom-up analysis: "The reason we’ve been able to outperform consistently is down to our approach – looking at high-growth prospects with good visibility of earnings, momentum and so on."
"And then, you’ve got to make sure you keep the winners and ditch the losers."
"It’s about not second-guessing the market, and pouring into substantially riskier assets to keep up with a rally. Sooner or later, you’ll get this wrong and lose a lot of money."
"Investors seem to like a fund that has a consistent process, which does what it says on the tin."
"I think most would prefer a fund to be resilient during difficult periods, and then underperform when markets are strong. Last year wasn’t fantastic, but we were still up about 23 per cent – no-one complained."
"Higher risk doesn’t mean higher returns in smaller companies – in fact, you could argue the opposite is true," he added.
As well as consistently outperforming its peer group, Nimmo’s flagship UK Smaller Companies fund has been less volatile in the last decade, and also has a lower max loss and max drawdown.
According to FE Analytics, the fund has a max loss of 21.72 per cent over 10 years – more than 10 percentage points less than its IMA UK Smaller Companies sector average.
Performance of fund vs sector over 10yrs
Source: FE Analytics
Nimmo says that "keeping the winners" is one of the most important things a fund manager can do – as well as one of the hardest. He points to ASOS, which he highlights as one of his biggest success stories, as a prime example.
"We’ve actually sold that one off a bit recently, but only because we like to keep any one single stock position below 5 per cent," he explained. "We’ve made about 15 times our initial investment, which I’m pretty happy with."
"You also offset the higher dealing costs associated with smaller companies by having a low turnover," he added.
Nimmo’s Standard Life UK Smaller Companies fund is soft-closed, but the closed-ended version, which has almost identical holdings, is available for an ongoing charges figure of 0.97 per cent.
He also runs the recently launched Global Smaller Companies fund, which requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.81 per cent.
The manager is positive about the state of UK businesses at the moment and points out he is significantly overweight domestic firms in his global portfolio.
In an article later on this week, Nimmo will highlight a selection of companies he has recently added to his portfolio.