Take advantage of volatility in UK small caps
This article first appeared in the October edition of Professional Paraplanner magazine It’s been a...
When it comes to our investments, it’s often tempting to pick the most popular option – the biggest or most well-known fund or, as has been the case recently, the latest ‘tip’ on social media.
Whether it’s because we have a fear of missing out or we just find reassurance in following the crowd, there is some comfort in doing what everyone else is doing.
But it can also be rewarding to unearth some hidden gems – investments overlooked by other people. Here, we highlight six pint-sized picks for your ISA this year – Elite Rated funds with less than £100m assets under management.
Although this fund launched almost six years ago and is a top quartile performer in its sector over one, three and five years*, this fund has just £77m assets under management**. A focused, high conviction portfolio of quality growth European equities, it has no constraints on regional or country allocations.
This fund was launched a decade ago, yet only has £45m assets under management**. It invests in real estate securities listed in the UK and Europe. The managers are also able to short unfavoured stocks, enabling them to express a wider range of views and better manage risk. This is a big positive given the small size of their investment universe.
This £32m global equity fund** can invest in any company around the world but has a strong bias towards larger and medium-sized multi-national businesses whose revenues are generated from all over the globe. The managers always have an eye on capital preservation. As a result, they are very willing to hold high levels of cash if valuations are unattractive.
The Granddaddy of the group, this fund was launched nearly 20 years ago, but like the companies it invests in it remains small, with £52m under management**. It is a true small cap fund that invests in genuinely smaller companies rather than mid-cap stocks. Another positive is that the fund avoids low quality, cash-burning stocks and its concentration allows it to capture the performance from its best ideas.
Sitting in the targeted absolute return sector, this £74m** long/short equity fund makes money from falling, as well as rising share prices. It invests primarily in the UK and the shorts aren’t just used to dampen volatility but are genuine sources of added value for investors. The managers use a wide range of trusted sources to identify investment themes and stock ideas.
The baby of the group, this fund has just £3m assets under management**, despite being launched in 2016. Co-managed by Edmund Harriss and Mark Hammond, it follows the Guinness formula, which has already proved successful with their Asian and global equity income funds. The managers have a one in, one-out approach, and each of the final 36 stocks in the portfolio is equally weighted.
*Source: FE fundinfo, total returns in sterling to 5 March 2021
**Source: fund fact sheet, 31 January 2021