Regardless, it is the star managers that have dominated the charts for more than a decade who top the sales charts month after month.
A strong track record is understandably in high demand, but relying solely on this can be dangerous.
Huge inflows can adversely impact the flexibility of a fund manager, and therefore performance.
Moreover, many of the biggest names in the industry are no spring chickens, and in many cases nearing retirement, which can often catch out long-term investors.
As FE Alpha Manager David Coombs told FE Trustnet earlier this year, it is more beneficial to find "the next big thing, the next Newton Asian Income".
In the next article in the series, a panel of industry professionals highlight potential future stars currently operating in the IMA UK All Companies sector.
Ed Legget, Standard Life
"Of the less well-known names blazing a trail in the All Companies sector, the one I would highlight is Ed Legget, manager of the Standard Life UK Equity Unconstrained fund," said Bestinvest’s Jason Hollands.
"Legget has been managing the fund since 2008 and has beaten the All Share by around 80 percentage points over five years."
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
"His approach is a multi cap one with a bias towards smaller companies; 22 per cent is in large caps, 26 per cent is in mid caps and 52 per cent is in smaller companies."
"As a result, he benefits from the best ideas generated by the wider Standard Life UK equities team, which is very strong in small caps."
Legget (pictured) explained his high-conviction style in an interview with FE Trustnet last month.
The highly rated manager targets companies whose ability to generate cash-flow is underrated by the market.
This means hanging on to companies even when their share price falls dramatically, which has resulted in the fund being significantly more volatile than its benchmark and peers.
Our data shows that Standard Life UK Equity Unconstrained has an annualised volatility of 31.69 per cent over five years, compared with 16.87 per cent from the All Share and 17.82 per cent from the IMA UK All Companies sector average.
Legget tends to drop further than his peers in falling markets, but his stellar performance in rallies – for example, 2009 when he delivered a whopping 99.17 per cent – means that he comes out well on top over longer-term cumulative periods.
Year-on-year performance of fund vs sector and index
| Name | 2013 (%) | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | 2007 (%) |
|---|---|---|---|---|---|---|---|
| Stan Life Inv UK Equity Unconstrained | 20.71 | 44.14 | -20.47 | 38.5 | 99.17 | -41.05 | -3.16 |
| IMA UK All Companies | 14.16 | 15.05 | -7.04 | 17.53 | 30.4 | -31.96 | 1.85 |
| FTSE All Share | 14.52 | 12.3 | -3.46 | 14.51 | 30.12 | -29.93 | 5.32 |
Source: FE Analytics
The £586m Standard Life UK Equity Unconstrained fund requires a minimum investment of £1,000 and has an ongoing charges figure (OCF) of 1.9 per cent.
Kevin Murphy and Nick Kirrage, Schroders
Hollands believes the duo of Kevin Murphy (pictured) and Nick Kirrage are a force to be reckoned with.
He is a particularly big fan of the Schroder Recovery fund, although the pair are also responsible for the Schroder Income fund.
"These guys have been putting in some impressive numbers on the Schroder Recovery fund, which also has a multi cap approach," he explained. "With industry behemoth M&G Recovery having a tough time, this more modestly sized fund could be the young pretender in the recovery fund space."
Schroder Recovery has been one of the most consistent performers in the UK All Companies sector recently, achieving top-quartile returns over one, three, five and 10 years. It is top decile over all but three of these years.
Murphy and Kirrage have significantly beaten M&G rival Tom Dobell over all of these time periods, albeit with more volatility.
Performance of funds vs sector and index over 5yrs
Source: FE Analytics
The Schroders team believes investors have a much better chance of making money if they target companies and sectors that are cheap, depressed and probably unattractive. Murphy explained the process in more detail in an FE Trustnet article last month.
The £348m Schroder Recovery fund requires a minimum investment of £1,000 and has an OCF of 1.52 per cent.
Alex Savvides, JO Hambro
Rob Morgan, analyst at Charles Stanley Direct, has been extremely impressed by Alex Savvides (pictured), manager of the JOHCM UK Dynamic portfolio.
The fund is still very small in size, with just £41m in assets under management (AUM); however, Morgan says he would not be surprised if it got a lot bigger in the coming years. "He’s a very impressive individual," said Morgan. "The fund has performed very, very well, but is still very small."
"Savvides has got a very good methodology and a sound understanding of the stocks he holds. He’s very value focused, but is unusual in that he looks at income quite closely."
"For a young guy, he’s very focused and confident in his process. A big bonus is that he’s an excellent communicator, which bodes well for him attracting assets in the future."
Savvides (pictured) only invests in companies that pay a dividend, or that are expected to pay one within a year.
He says this gives his special situations portfolio a quality overlay, and stops him from being drawn into value traps.
The manager explained this process in more detail in an interview with FE Trustnet back in March.
He has headed up the JOHCM UK Dynamic fund since its launch in June 2008.
It has been a top-quartile performer in its sector since then, boasting returns of 83.4 per cent, significantly beating its All Share benchmark in the process.
Performance of fund vs sector and index since launch
Source: FE Analytics
The fund is also a top-quartile performer over one and three years.
Savvides has been hampered by big institutional investors pulling money out of the fund at key times, which goes some way in explaining why it is still so small. However, Morgan thinks it is definitely one to watch for the future.
JOHCM UK Dynamic requires a minimum investment of £1,000 and has an OCF of 1.5 per cent; however, like all JO Hambro portfolios, it charges a performance fee.
In the first article in the series, FE Trustnet looked at "the next big thing" in the UK Equity Income sector.