Global smaller companies: performing without the hype
Between the hype and genuine innovations a lot of mega-cap artificial intelligence dust was kicke...
The saying “it’s a marathon not a sprint” could never be truer than for the 40 horses and jockeys that line up for the Grand National at Aintree this Saturday.
The 180-year old race is one of the most popular events on the UK sporting calendar. Last year 13 million people (that is 20% of the UK’s population) bet on the race with up to £250 million heading to the bookies. The average price of a horse winning the race is 20/1, meaning you’ll make a tidy profit if you get lucky!!!
The first fence is always a phenomenal sight with all 40 horses careering over it at the same time. But the initial sprint soon gives way to a slog and the horses with the best stamina always come out on top.
That made us think at FundCalibre. We wanted to look at which fund managers have delivered for investors over the long-term – through the highs and lows of a market cycle. Below are four managers who have stood the test of time (and four horses that can win this year Grand National for a bit of fun).
There is nothing not to like about last year’s winner Tiger Roll (apart from the short-price). He is not the biggest horse, but he keeps outlasting all of his rivals – it makes him the first horse since Red Rum in 1974 to have a favourite’s chance of retaining his crown
As the name suggest, the R&M UK Recovery fund, managed by Hugh Sergeant looks for good businesses that are currently experiencing below normal profit levels, which are depressing their valuations, but which he feels can turn their fortunes around. The fund typically holds 200 or so of these companies.
Like Tiger Roll himself, the fund is not the largest at £263 million, but the nature of the portfolio and its additional flexibility has seen it produce consist performance in the past decade returning 382.9%*, compared to an average of 179.6%* for funds in the Investment Association UK All Companies sector.
Vintage Clouds has never run in the Grand National before but has run in the Scottish version twice (finishing third and seventh). His ability to get around shows he is a proven runner at extreme distances and is a big player this Saturday.
You do not get many funds which consistently outperform more than the T. Rowe Price Global Focused Growth Equity portfolio. The manager, David Eiswert, looks for businesses which have the potential to generate above-average and sustainable rates of earnings growth. The fund is currently overweight information technology, with Alphabet (4%**), Facebook (3%**) and Amazon (2.6%**) the big digital and media players among its top 10 holdings. The fund is a proven winner, returning 328%* in the past 10 years compared to 193.6%* for the Investment Association Global sector.
The Grand National is a handicap race – this means horses are given a weight according to their ability. The top-weighted horse is Anibale Fly, a class performer who has placed in the last two Gold Cups as well as finishing fourth in last year’s Grand National, a reflection of the horse’s consistency.
The M&G Optimal Income fund managed by Richard Woolnough has similar traits and should be a consideration for most investors looking towards the fixed income market. The fund has a very flexible mandate which allows it to shift the interest rate exposure and to invest across the credit spectrum. At £17.8 billion the fund is one of the largest retail offerings in the UK – something which is supported by consistent outperformance. In the past decade the fund has returned 107.5%* compared to 98.6%* for the Investment Association Sterling Strategic Bond sector.
Falsom Blue is not among the favourites for the Grand National but is a quality horse in its own right. However, if the ground is soft or heavy it could well be the horse to be on as it is a specialist in the mud.
When it comes to specialist funds it is hard to top the performance of the Axa Framlington Global Technology fund, managed by Jeremy Gleeson. Jeremy, who has managed this fund since 2007, believes individual stock picking ultimately drives portfolio construction. As a result, each holding is exposed to one or more key themes that are expected to underpin technology sector growth over the coming years. He specifically targets new technology with strong commercial potential. This fund has returned 545.4%* in the past decade, well above the 405%* produced on average in the Investment Association Technology and Telecommunications sector.
*Source: FE Analytics, total returns in sterling, ten years to 3 April 2019
**Fund factsheet, 28 February 2019