With this in mind, FE Research flags five funds run by managers with such an approach.
Cazenove UK Smaller Companies
The five crown-rated Cazenove UK Smaller Companies fund has one of the best track records in the IMA UK Smaller Companies sector over one, three, five and 10 years.
Over the longer period, the £271.7m fund has made 308.11 per cent, compared with 201.2 per cent from the sector and 94.19 per cent from its benchmark.
Performance of fund vs sector and index over 10-yrs
Source: FE Analytics
FE Alpha Manager Paul Marriage has been running the fund since 2006, with great success; he has more than doubled the returns of his peer group over one, three and five years.
Rob Gleeson, head of FE Research, said: "Small caps offer excellent growth potential over the long-term which plays to the strengths of early-stage investors. Paul Marriage has a strict sell-discipline, which helps him realise his gains and reinvest the proceeds into other high-growth opportunities."
The fund requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.6 per cent.
Franklin UK Mid Cap
Amandine Thierree, fund analyst at FE, says flexibility is the key to FE Alpha Manager Paul Spencer's success.
"Despite being part of a group as large as Franklin Templeton, Paul Spencer is very free in the way he conducts his investment decisions," she said.
"His stockbroking background allows him to focus more quickly on what he believes makes a quality company. When he took over the fund, the strategy was redirected towards a long-term view, which makes it more suitable for first time investors."
The fund is a standout performer in the IMA UK All Companies sector over one, three, five and 10 years.
Since Spencer took over Franklin UK Mid Cap in February 2006, it has returned an impressive 114.77 per cent, compared with 27.33 per cent from the sector. The FTSE 250 index, by comparison, returned 59.31 per cent over the period.
The four crown-rated fund requires a minimum investment of £1,000 and has a TER of 1.58 per cent.
AXA Framlington UK Select Opportunities
Charles Younes, fund analyst at FE Research, says FE Alpha Manager Nigel Thomas is highly regarded for his 20-year track record of investing in UK companies.
"When analysing a company, Nigel tries to understand how a company can transform its sector and its business model over the long-term," he explained.
"Nigel defines his investment approach with the following motto: 'Things will not get better or worse, they will become different.'"
The £3.3bn, five crown-rated portfolio is a top-quartile performer over three, five and 10 years, returning 230.02 per cent over the past decade. Over the same period, the IMA UK All Companies sector is up by 114.67 per cent.
Performance of fund vs sector over 10-yrs
Source: FE Analytics
However, the fund is a third-quartile performer over one year, missing out on a rally in financials that has boosted its peers.
"As Nigel needs to have a great understanding of a business model, he has always stayed away from financial stocks as he has never really understood this sector or its functioning," Younes continued.
Pearson, Imagination Technology Group and Weir are examples of companies that Thomas believes can grow over the long-term.
The fund requires a minimum investment of £1,000 and has a TER of 1.56 per cent.
Jupiter European Special Situations
Europe has been out of favour recently as the ongoing debt crisis has left questions hanging over the single currency’s future.
However, the five crown-rated Jupiter European Special Situations fund has been a top-quartile performer over three, five and 10 years.
Since FE Alpha Manager Cedric de Fonclare took over in July 2005, it is up 72.86 per cent, while the IMA Europe ex UK sector has made 42.64 per cent.
The Jupiter portfolio has also beaten the FTSE World Europe ex UK index, which returned 48.03 per cent over the period.
Performance of fund vs sector and benchmark since manager change
Source: FE Analytics
The £271.7m portfolio is weighted in favour of industrial and healthcare stocks, with Sanofi Aventis and French aerospace and defence company Safran among its top-10.
Its largest holding is Swiss bank UBS, which makes up 3.27 per cent of the portfolio.
Younes likes de Fonclare’s style of buying young companies and continuing to hold them once they have grown significantly.
"De Fonclare also wants to ensure that the company's management can extend its growth or adapt to new economic environments," he said.
"Cedric tends to have a defensive positioning and has done a superb job in the past of protecting investors’ capital during falling markets."
The fund requires a minimum investment of £500 and has a TER of 1.8 per cent.
Rathbone Global Opportunities
While this fund suffered a difficult 2008, Gleeson says FE Alpha Manager James Thomson has learned from his mistakes.
"This fund is a good choice as a beginner’s investment because James Thomson has refocused his portfolio to concentrate more on capital protection, while still investing in international companies with long-term growth potential," Gleeson explained.
The £180.9m portfolio has four crowns to its name and is a top-quartile performer over three and 10 years. It is second quartile over one and five years, owing to losses sustained during the credit crunch and an underweight in financials, a sector that has rallied strongly in the last 12 months.
Over 10 years, the fund has more than doubled the returns of the IMA Global sector, delivering 216.8 per cent, compared with a sector average of 95.30 per cent. The FTSE World index returned 118.3 per cent over the period.
Thomson is optimistic about the US economy, with the majority of the portfolio allocated to the region, followed by the UK and Europe.
The fund requires a minimum investment of £1,000 and has a TER of 1.56 per cent.