14th March 2016
Despite the thousands of funds available to UK ISA investors, many people are tempted to go with high profile names when choosing where to invest their money. However, that can mean overlooking some lesser known but equally good, funds and fund managers.
Investment analyst FundCalibre has identified five hidden gems, which make its Elite Rated funds list, and all have less than £100m under management, where the manager has demonstrated they can consistently add value over time. Below the group explain why it is backing them…
1. Legg Mason Global Equity Income (£28m)
This fund is jointly managed by Paul Ehrlichman, Sean Bogda and Safa Muhtaseb. It has a unique proven process, which combines an initial quantitative screen, followed by a close look at each individual stock. Companies with declining dividends or competitive positions, weak management or poor industry conditions are immediately eliminated and, of those left, only companies trading well below their normal valuations are chosen. We like that the managers have the courage to be both contrarian and radically different to their benchmark, with more than 60% invested in small and medium sized companies.
2. T. Rowe Price European Smaller Companies Equity (£49m)
The fund is pan-European, investing around 30% in the UK. Its manager, Ben Griffiths, is highly experienced, with a proven track record of managing small- and mid-cap portfolios in Europe. The universe is under-researched by most major investment houses, giving the team plenty of scope to find unloved and undervalued companies. Buying early or in a contrarian fashion, with a long-term view, allows Ben to compound his winners. His enthusiasm for small-cap investing is evident.
3. SVS Church House Tenax Absolute Return Strategies (£51m)
Church House is a small boutique house run by two very experienced managers. This fund is a very useful portfolio diversifier and one of just a few in its sector that targets an absolute return from diversification and risk management alone, rather than short selling. It invests directly in different assets, rather than using the fund of funds route, with the managers looking for low correlation and low volatility in the fund’s overall value.
4. Liontrust Macro UK Growth (£67m)
The core philosophy of the fund is that macro-thematic analysis and the identification of economic, political and social developments are key to outperformance. The fund focuses on major factors affecting the world, such as global warming, globalisation, ageing populations and quantitative easing. The managers also focus on negative themes to avoid certain sectors. As a result, they don’t own any incumbent banks, utility or tobacco companies. Each theme is capped at 20% of the portfolio so that no one idea dominates and it has a bias towards large and mid-cap companies.
5. F&C Real Estate Securities (£84m)
Investors can gain access to property securities listed in both the UK and Europe through this fund. The managers see real estate as an income stream with a ‘capital kicker’. They look at the macroeconomic situation first for each sector, then look at individual stocks. They also have the flexibility to short companies if they want to. This is a big positive given the relatively small size of the investment universe.