When it comes to funds, that sort of knowledge can either lead to higher returns further down the line or simply boost your ego because you got there first. However, although FE Trustnet usually talks about the up-and-coming funds or managers to watch out for, not much is said about the fund groups themselves.
Here, with the help of Rowan Dartington’s Tim Cockerill (pictured), we highlight three fund groups that are tipped to take the UK retail market by storm in the coming years.
Hermes Fund Managers
Cockerill says Hermes is a group that investors should take a closer look at. It only moved into the UK retail space recently, after focusing on the institutional and offshore markets, but is now making a concerted effort to build its presence closer to home.
Hermes currently has 12 funds in the IMA universe, all of which were launched at the back end of last year.
These include regional equity portfolios such as Hermes US SMID Equity, Hermes Japan Equity and Hermes Asia ex Japan Equity, along with fixed income funds such as Hermes Global Investment Grade, Hermes Global High Yield Bond and Hermes Active UK Inflation Linked Bond.
Although some experts say it is too early to invest in a fund that was launched less than a year ago, the strategies that the managers use have been in place for a lot longer, albeit in another form.
Harriet Steel, head of business development, said: "This is a new initiative for us but it has been successful so far."
"Our heritage is in the institutional space as we used to be the in-house asset manager at BTPS and became independent five years ago. However, we looked through our product offerings and found that they had a high degree of relevance to the wholesale market."
"Hermes has had a 70 per cent increase in new client business in the last 18 months through our institutional and wholesale channels."
Steel says that Hermes is taking things one step at a time and for the moment has been more focused on the higher end of the wholesale market, such as discretionary managers, multi-managers, fund selectors and wealth managers.
However, she says funds such as Hermes US SMID Equity are seeing major inflows from those areas because of the management teams' focused style and because previously popular funds such as Findlay Park American are now closed.
Year-to-date, the Hermes US SMID Equity fund has returned 32 per cent. As a point of comparison, the Russell 1000 index has returned 26.35 per cent.
Performance of fund vs index year to date
Source: FE Analytics
Nevertheless, Steel says Hermes is planning to branch out towards a retail audience.
"We are being practical and taking it one step at a time. We have talked to a number of the global bank platforms and we are now on a number of their buy-lists. We are also on the Cofunds and Raymond James Platforms," she added.
Somerset Capital Management
Cockerill believes emerging markets specialist Somerset Capital Management has what it takes to be a leading light in the UK retail space – especially given that there are few options in the sector as a result of the numerous soft-closures in recent months.
"They have been around for a while now, but one of the groups I met recently was Somerset Capital," he said.
"Obviously, the sector they operate in is changing with the recent announcements from First State and Aberdeen to soft-close their funds. This could be really important for them and it is their chance to say: 'hello, we are here and we are specialists.'"
"It is quite an interesting group and I think I might take the time to go and visit them again," he added.
The group currently runs three portfolios: Somerset Global Emerging Markets, Somerset Emerging Markets Small Cap and Somerset Emerging Markets Dividend Growth.
The group has soft-closed the Somerset Global Emerging Markets Small Cap fund – which is headed up by FE Alpha Mark Asquith – to protect current investors and to keep the portfolio nimble, but the other two funds are still open.
The best-performing out of the two is the five crown-rated Emerging Markets Dividend Growth fund, which is managed by Edward Lam.
According to FE Analytics, the fund has been the sixth best-performing portfolio in the IMA Global Emerging Markets sector since its launch in March 2010. It has returned 26.49 per cent over this time, beating the MSCI Emerging Markets index by 20 percentage points in the process.
Performance of fund vs sector and index since Mar 2010
Source: FE Analytics
Despite the strong performance of Somerset's funds, Oliver Crawley – who is a partner at the firm – says there are no plans as yet to branch out from its niche and that it is instead planning to focus on what it does best.
"One of the best pieces of advice we were given when setting up Somerset Capital over six years ago was 'remain focused on your core skill-set'," he said.
"Our investment team have an exceptional track record in picking stocks across the emerging markets universe and we want to continue to focus exclusively on the emerging market asset class," he added.
Nevertheless, Somerset Capital recently told FE Trustnet that it was considering launching a frontier markets investment trust in the next couple of years, because it already has exposure to the asset class via its small and mid cap emerging market mandates.
Old Mutual Global Investors
Old Mutual is already a big name in this business, but Cockerill says it has the potential to join the likes of Schroders and M&G as one of the dominant players in the coming years.
"Old Mutual are making big strides, which has been shown as they have brought in Richard Buxton (pictured)," Cockerill said.
"They are clearly well known within our industry, but in broader circles they are not as well known. However, I can see that if they can get it right, Old Mutual could well be one of the biggest names in the UK," he added.
Old Mutual Global Investors was created by combining the Old Mutual Asset Management and Skandia fund ranges. It currently runs a wide selection of funds focusing on global equities, fixed income and multi-manager portfolios.
Old Mutual made a clear signal of its intent by hiring Buxton, who was best-known for managing the Schroder UK Alpha Plus fund.
During his lengthy career running funds in the IMA universe, Buxton has returned a stellar 220.36 per cent while his peer group composite has returned 140.95 per cent.
Performance of manager vs peers since June 2002
Source: FE Analytics
Julian Ide, who is chief executive officer at Old Mutual Global Investors, says the plan is to grow the brand so it can continue to be one of the major players in the UK wholesale space.
"When we decided to invigorate the brand, we felt we already had a good foundation with fixed income managers such as Stewart Cowley, we were market leaders in small and mid cap equities and a leader in multi-manager funds," he said.
"However, to realise our ambitions, we knew we wanted to add to our already good fund management team and go and get the best managers out there with broader capabilities. That’s where Richard Buxton came in."
"It was a bit of an audacious hire, but we didn’t just go to a head-hunter and say we want a head of UK equities. I knew him very well and he really is uniquely positioned in that space."
"Winners like working with winners and our current managers like Stewart Cowley, Daniel Nickols and Stephen Message were thrilled with the news that Richard was coming over because it meant we were taking this seriously."
"What we are aiming to do is be a top-five player in the UK wholesale asset management space. We are on our way and are knocking on the door, but there is still a lot to do," he added.
