The beauty of a quant-based ranking system is that it cuts through the marketing to highlight funds that investors may have otherwise overlooked.
Most investors are drawn to big funds thanks to the greater attention they receive in the press and the large amount they spend on advertising. There is also a strong psychological tendency to stick with the crowd.
Here are four funds that have gathered less than £100m in assets despite the fact that all of them have an excellent track record. All have five FE Crowns, the highest ranking available.
Premier Multi Asset Monthly Income
This £62m portfolio has seen strong inflows this year as its reputation has started to grow: it is the fourth-best portfolio in its IMA Mixed Investment 20%-60% Shares sector over three years.
Over that time period it has returned 32.14 per cent compared with a sector average of just 18.09 per cent. It is currently yielding a generous 4.15 per cent. It pays out its yield monthly, which should make it highly attractive at the current time.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The fund buys portfolios that are themselves less well-known and in some cases hard or impossible for retail investors to access.
It currently has 6.6 per cent in alternatives, while the bond segment of the portfolio also includes some more niche names such as the TwentyFour Dynamic Bond fund, which buys RMBS in Europe.
The first couple of years of the fund’s life saw it perform roughly in line with its sector before it pulled away in 2012, returning 16.32 per cent, double the 8.35 per cent of the average fund. It has made 14.2 per cent so far this year while the sector has made just 8.81 per cent.
The major drawback is the ongoing charges figure, which is high at 2.34 per cent.
It is run by a team headed up by David Hambidge.
Cavendish UK Balanced Income
This £33m fund sits in the IMA UK Equity & Bond Income sector, which as a whole is largely overlooked.
It not only has five FE Crowns but an FE Alpha Manager in Julian Lewis. Our data shows it is a top-quartile performer over three years with returns of 43.19 per cent.
This is the second-best result in the 17-fund sector – the average fund has made 34.42 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
It has been doing well from a high weighting to financials, with Hargreaves Lansdown its second-biggest holding at 2.5 per cent of the portfolio. It also has 2.4 per cent in Standard Life, 2.1 per cent in Henderson and 2.1 per cent in Legal & General.
Ongoing charges are 1.38 per cent and its yield currently stands at 4.3 per cent. The fund is also a member of the FE Select 100.
TB Wise Income
Tony Yarrow’s fund was launched in October 2005. It had a rough patch during the financial crisis but has performed very well since then, logging top-quartile returns in 2011, 2012 and 2013.
It is the seventh-best fund in the IMA Flexible sector over five years and the third-best over three.
Over the latter period it has made 41.51 per cent against a sector average of 21.57 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
It holds a mixture of direct equity and bonds, as well as funds, and aims to be a one-stop shop for income investors.
The top holding is the Standard Life Property fund, which is worth 8.9 per cent of assets; the F&C UK REIT accounts for 7.5 per cent. Property in total makes up 21.8 per cent of the fund.
It has a total of 28.3 per cent in directly held income shares and a further 7.2 per cent in equity income funds. It has only 10.3 per cent in fixed income.
The fund has ongoing charges of 2.08 per cent.
CIS Sustainable World
This £97.8m portfolio, headed up by FE Alpha Manager Mike Fox, has an ethical remit, investing only in companies that meet the Co-operative Investments ethical investment policy. However, it is the performance that stands out.
It is the second-best performer in the IMA Mixed Investment 40%-85% Shares sector over three years, having returned 43.78 per cent. The sector average is just 23.62 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The fund’s top holding is Google, at 3.83 per cent, while Johnson & Johnson, Lloyds and Walt Disney also appear in the list.
It has 7.7 per cent in cash and 15.5 per cent in fixed interest. Industrials, consumer services and healthcare are the three highest sector weights.
The fund's yield is 1.4 per cent, but it is not a target. It has ongoing charges of just 0.79 per cent.