With this in mind, FE Trustnet looks at the funds in the UK All Companies and UK Smaller Companies sectors that are top-quartile performers since launch but that have yet to reach the three-year track record that would make them eligible for an FE Crown rating.
Ardevora UK Equity
Like their Ardevora UK Income fund, Jeremy Lang and William Pattisson's Ardevora UK Equity portfolio is also a top-quartile performer since its launch in December 2011.
According to FE Analytics, the Irish-domiciled £143m fund has returned 68.84 per cent since inception, more than doubling the gains of the IMA UK All Companies sector.
Performance of fund vs sector since Feb 2011
Source: FE Analytics
It has also delivered top-quartile returns over 12 months.
Ardevora UK Equity has a clear mid cap bias, with 52 per cent of the fund weighted towards medium-sized companies. The managers are big fans of the UK housebuilding sector, which performed strongly last year as the UK’s economic outlook began to improve.
One of their favoured stocks is Barratt Developments: even though it has returned close to 250 per cent over two years, the managers say the share price still has a lot further to run.
The fund differs from others in the sector as Lang and Pattisson have the ability to take long and short positions. Ardevora UK Equity is currently net short the UK’s utilities and healthcare sectors.
The fund requires a minimum investment of £5,000 and has an annual management charge of 1.75 per cent.
City Financial UK Select Opportunities
City Financial UK Select Opportunities is another fund that is making waves in the IMA UK All Companies sector.
The £66m fund is headed up by FE Alpha Manager Leigh Himsworth, who has previously managed UK-focused funds at other groups such as Franklin, Royal London and Gartmore.
City Financial UK Select Opportunities was launched in September 2011, and has returned 60.14 per cent since then. This is 25 percentage points more than the FTSE All Share managed.
It is a truly multi-cap fund, as shown by the fact that Himsworth holds 32.3 per cent in large caps, 38.4 per cent in mid caps and a further 27.4 per cent in small caps and AIM stocks.
He recently told FE Trustnet where he was finding value in the markets.
His top-10 holdings include the FTSE 100-listed GlaxoSmithKline, the FTSE 250-listed SVG Capital and the FTSE Small Cap-listed Xchanging.
Himsworth's weighting to the lower end of the UK market would have helped its performance recently as the fund has been a comfortable top-quartile performer over one year.
The fund requires a minimum investment of £1,000, but has a rather expensive ongoing charges figure (OCF) of 1.85 per cent.
Premier ConBrio Sanford Deland UK Buffettology
As the name suggests, Keith Ashworth-Lord’s Premier ConBrio Sanford Deland UK Buffettology fund aims to mirror the strategy of legendary investor Warren Buffett.
He explained to FE Trustnet last year what this means.
Ashworth-Lord looks for companies that display traits such as a comprehensible business model, an enduring franchise with pricing power and high returns on capital. This strategy has worked well so far.
Our data shows that it is a top-quartile performer in the IMA UK All Companies sector since its launch in March 2008 with returns of 57.95 per cent, more than doubling the gains of the FTSE All Share.
Performance of fund vs sector and index since Mar 2011
Source: FE Analytics
As well as being a top-quartile performer over one year, Premier ConBrio Sanford Deland UK Buffettology is also one of the top-five funds in the sector since its launch for alpha generation relative to its benchmark and its information ratio.
The fund currently has a 10 per cent cash weighting. Its largest stock positions are Driver Group, Sweett Group and Dart Group – all of which are listed on the FTSE AIM.
The UK Buffettology fund requires a minimum investment of £500 and, like the City Financial fund, has a lofty OCF, of 2.93 per cent.
AXA Framlington UK Mid Cap
Given the recent strong performance of the lower end of the UK market, it isn’t too surprising to see that AXA Framlington UK Mid Cap is a top-quartile performer in the IMA UK All Companies sector since its launch in March 2011.
However, manager Chris St John has also been very effective at adding value relative to his FTSE 250 benchmark.
The fund is the fifth-best performing portfolio in the sector since launch with returns of 71.3 per cent, compared with 45.29 per cent from the FTSE 250 index.
The fund is made up of 71 holdings and the assets are evenly spread. For example, its largest position is the wealth management firm St James’s Place, which makes up 2.5 per cent of the portfolio.
St John is also allowed to stray outside of his benchmark, as shown by the fact that he holds 10 per cent in the FTSE 100 and around 5 per cent across the FTSE Small Cap and AIM indices.
The OCF is 1.7 per cent and the minimum investment is £1,000.
CF Miton UK Smaller Companies
Gervais Williams and Martin Turner’s CF Miton UK Smaller Companies fund was the only member of the IMA UK Smaller Companies sector that fitted the criteria.
The duo’s CF Miton UK Multi Cap Income fund has become increasingly popular with investors, however the group was forced to close the portfolio last year to protect the investment style. However, its smaller companies fund has performed just as well.
The £26.9m fund was launched in December 2012. According to FE Analytics, it is the best-performing portfolio in the sector since then with returns of 67.42 per cent, beating the sector by more than 25 percentage points.
Performance of fund vs sector since Dec 2012
Source: FE Analytics
The fund is also one of the sector’s best performers in terms of its alpha generation, information ratio and Sharpe ratio.
It boasts top-quartile returns over the past 12 months as well.
The fund is primarily invested in the FTSE AIM, with the index making up close to three quarters of the portfolio’s assets. It only holds 5 per cent in the FTSE Small Cap, but has 14 per cent in cash.
It has an OCF of 1.87 per cent and requires a minimum investment of £1,000.
In the previous article in the series, FE Trustnet looked at UK equity income funds.
