The UK economy made a strong recovery in 2021 following the financial impact of Covid the year before, but confidence in the region has dropped as we enter 2022 despite strong performance, according to data from Hargreaves Lansdown.
All markets declined in February as tensions on the Ukraine border heightened but so far this year the domestic market has made the highest returns of many major rivals, returning 1.2% – the only region to make a meaningful positive return.
However, investor confidence in the UK fell 11% in February, compared to a 10% fall in Europe and 7% decline in the US. Although the majority are not convinced, some may be contemplating how to invest in the recovering UK market.
Here, Trustnet looks at UK based funds that are managed by FE fundinfo Alpha Managers and have an FE fundinfo Crown Rating of five, but may be being overlooked due to their size of under £500m.
Previously in this series, we have covered fund in the Asian, Global and European sectors that investors may be ignoring.
SDL Free Spirit
The SDL Free Sprit fund has grown to £109.7m in the five years since its launch, beating the IA UK All Companies sector by 40.6 percentage points in that time.
Alpha Manager Keith Ashworth-Lord took charge of the fund in June last year after Andrew Vaughan stepped down. Though the SDL Free Spirit fund has returned 68% over the past five years, performance has tailed off recently and the fund is down 4.5% over the past year.
Total return of fund vs sector over past five years
Source: FE Analytics
Much of this decline was due to the underperformance of respirator manufacturer, Avon Protection which is down 63.6% over the past year. All holdings in the company were sold at a loss last year, along with property investors, CLS Holdings which was down 4%.
Ashworth-Lord said: “There are a number of learning points from this experience which we intend to elaborate on in our year-end review, but suffice to say we sleep easier with it gone.”
The concentrated portfolio of 27 holdings may expose it to bigger losses when stocks like Avon perform poorly, but also has the benefit of making higher returns when stocks do well, such as top holding Tatton Asset Management which is up 45%.
Slater Recovery
The Slater Recovery fund is run by Alpha Manager Mark Slater and is the oldest portfolio in his range of four which also includes the Growth and Income funds.
In the past five years the portfolio is up 107.5% – almost four times the rate of the IA UK All Companies sector. It has been a top quartile performer in the sector for the past decade. The portfolio has also found success over the past year, up 16.6% and beating the average peer by 7.8 percentage points.
Total return of fund vs sector over past year
Source: FE Analytics
Pharmaceutical company, Clinigen made the largest contribution to 2021’s performance; its share price jumped 58% when Triton Investment Management bid to buy the company at the end of November.
Media company, Future which is the fund’s largest holding (5.6% of portfolio) also drove up returns, with the share price increasing 45.5% in the past year.
Marlborough Multi-Cap Growth
At 27 years old, the Marlborough Multi-Cap Growth fund has established itself firmly in the IA UK All companies sector. Since launch in 1995, the portfolio is up 945% – almost double the sector’s 495% increase.
It has not rested on performance from its early years, however, as it has been a top-quartile performer over the past three, five and 10 years.
Total Return of fund vs sector since launch
Source: FE Analytics
Most of these assets are in the consumer discretionary and technology sectors, with both areas accounting for 24.1% and 21.3% of total holdings respectively. This has been a good area of the market to be in over recent years and the £304m fund was up 17% in 2021 thanks to strong returns from holdings such a Future, Auction Technology Group (up 16.3%) and Experian (up 9.5%).
However, it lost all of these gains in January, ending the past year on a loss of 0.3% as growth companies were sold off heavily as inflation and higher interest rates have hit these stocks hard.
| Fund | Sector | Fund size | Fund managers (s) | OCF |
| SDL Free Spirit Acc GBP in GB | IA UK All Companies | £109.7m | Keith Ashworth-Lord | 1.1% |
| Marlborough Multi-Cap Growth | IA UK All Companies | £304.4m | Richard Hallett | 0.8% |
| Slater Recovery | IA UK All Companies | £450.1m | Mark Slater | 0.8% |