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Nine ‘up and coming’ funds to watch

Joanna Faith
Written By:
Joanna Faith
Posted:
Updated:
08/07/2013

Our expert panel reveals the funds it thinks will soon become household names.

When it comes to investment funds, the financial press is often quick to praise the winners and lambast the losers.

However, with over 2,000 UK-registered funds in the investment universe, there are plenty of products that don’t receive the attention they richly deserve.

Some are left on the side-lines for the right reasons but, according to our expert panel, there are a number of funds that are steadily rising up the ranks and could soon become household names.

Here are eight of the best:

 

JO Hambro Capital Management UK Dynamic

Manager Alex Savvides has run the JOHCM UK Dynamic fund since its launch in June 2008.

Savvides is very process driven and splits his portfolio three ways: 40% recovery, 30% restructuring and 30% hidden growth today.

Ben Yearsley, head of investment research at Charles Stanley Direct, says: “It is a small fund with a great performance over its four year life. I like his approach, and he articulates it very well.”

Yearsley is not the only one to praise this fund. Darius McDermott, managing director of Chelsea Financial Services, says: “Alex is part of a strong UK team and has performed very well since launch. He runs a concentrated portfolio and has outperformed in 4 of the last 5 years and I am amazed his fund is still so small.”

 

Hermes US SMID Cap Equity

Hermes Fund Managers launched its US small and mid-cap equity fund – based on a strategy run by its US team for over a decade – in the UK market last autumn.

Ian Aylward, head of multi-manager research at Aviva Investors, says manager Robert Anstey is an outstanding investor in what is a capacity constrained space.

“US small and mid-sized companies are priced less efficiently than their large cap counterparts and Robert has harnessed this fact to deliver out-performance of the Russell 2500 in seven of the last 11 years,” Niven says.

 

Chelverton UK Equity Income

The Chelverton UK Equity Income fund, managed by David Taylor and David Horner, is recommended by Gary Potter, F&C’s co-head of multi-manager.

The fund invests in UK small and mid-cap companies, with 50% of the portfolio allocated to each sector.

It has been a fantastic performer returning 17% year-to-date compared to the sector average of 12%.

 

Baillie Gifford European

There are several deservedly popular heavyweight European Equity funds favoured by retail investors but this £75m “hidden gem” has returned 67% over the last five years versus a sector average of just 29%, placing it 5/87 in its peer group, says Rob Pemberton, investment director at HFM Columbus.

The managers – Thomas Coutts, Stephen Paice and Paul Faulkner – have four main aspects to their investment philosophy: quality growth, long-term, active and contrarian.

 

Legg Mason ClearBridge US Aggressive Growth

This fund invests in companies with above-average growth potential, in excess of the S&P 500, using a strong valuation discipline and a fundamental stock-picking approach.

Holdings may have been overlooked by investment analysts and are therefore priced inefficiently.

David Coombs, manager of the Rathbone Multi-Asset Portfolios, says: “The managers, who are experienced and high conviction-based, believe that the price you pay is critical for creating value for investors. Their subsequent long holding periods and low turnover represents a refreshing approach to investing in growth companies, and this fund offers a good complement to more index-aware US growth funds.”

 

Aspect Diversified Trends

Another Coombs recommendation, this is a managed futures fund from Aspect Capital which trades futures across all asset classes, and is computer-driven.

These type of funds profit by identifying medium-term trends, taking long and short positions across equities, commodities, interest rates, government bonds and currencies.

Coombs says: “Whilst they are quite risky in their own right, with high levels of volatility, these strategies tend to be lowly-correlated with risk assets. They also tend to perform well when volatility rises. As ever, investors must understand the performance drivers of a product like this and how these might change over time. It is crucial that they look at these strategies in tandem with the rest of their investment objectives.”

 

Artemis Global Income

Manager Jacob de Tusch-Lec has been on the fringes for a while, but this fund should be the one that propels him to the big time, says Yearsley.

The manager invests in unrecognised opportunities and favours lesser known large-cap companies rather than mega-caps.

“He has a flexible approach and tries to adapt to changing macro conditions through investment in quality, cyclical and value stocks and follows the same investment approach employed by the Artemis Income Fund,” Yearsley says.

 

Majedie UK Equity

The Majedie UK Equity fund is managed by three long standing managers with different styles who have worked together for over 15 years. The fund targets FTSE All Share +3% on a rolling three year basis.

The managers have a common sense approach to investing: they look for stocks with low valuations and with low but rising expectations and will sell when the valuations are high with high and falling expectations.

Katie Roberts, product director at Fidelity, says: “The fund’s long term performance is very strong – investors should expect outperformance on the downside with some upside capture.”

 

Morant Wright Japan

Morant Wright are Japan specialists and only run portfolios investing in this region. They focus on finding those low valued names with strong balance sheets, solid franchise which is under appreciated by the market and progressive management.

Roberts rates the managers’ consistent and well defined investment approach.


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