Here we look at some of the funds that FE’s panel of leading advisers have chosen for the three indices designed for investors with different appetites for risk: Aggressive, Balanced and Cautious.
You can find more information about the AFI indices here.
JOHCM UK Dynamic
The £89m JOHCM UK Dynamic fund, run by FE Alpha Managers Alex Savvides (pictured below) and Mark Costar, invests in turnaround stories, in particular companies that are addressing problems that have weighed them down in the past.
It has done very well out of this strategy, achieving top-quartile returns over three and five years.
Over the past three years it has returned 52.33 per cent while the FTSE All Share has made just 32.96 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
Among the companies it is currently backing are BP, which is still recovering from the Gulf of Mexico disaster, Tesco, which has had a run of disappointing forays into foreign markets, and Qinetiq, the former technological research department of the Ministry of Defence.
Balfour Beatty was added to the fund in August, and the managers say that there are already signs the group is recovering and will be able to increase its earnings.
The fund requires a minimum initial investment of £1,000. Like all JO Hambro funds, it has a performance fee, which can put off some investors. It is yielding 2.83 per cent, although it is not an income fund.
The fund is included in the AFI Aggressive and AFI Balanced indices.
SVM UK Opportunities
The £97.3m SVM UK Opportunities fund suffered badly in 2007 and 2008 - it was the worst performer out of 234 funds in the sector in the latter year, losing 55.19 per cent.
However, over the longer term it still looks good thanks to its strong outperformance in bull markets.
It was the single best-performing fund in the sector in 2006 and again in 2009, returning 101.35 per cent in the latter year.
Second-quartile returns in 2012 have pushed it in to the second quartile over three years; it is back in the top-quartile so far this year, however.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
The fund is run by Neil Veitch with FE Alpha Manager Margaret Lawson as its deputy.
It is an aggressively positioned fund, overweight financials, technology and consumer services. It is biased towards the bottom end of the FTSE 100 and the top end of the FTSE 250, and has 15 per cent in AIM stocks.
The fund requires a minimum initial investment of £1,000 and has ongoing charges of 1.84 per cent.
Majedie UK Equity
The £2.1bn Majedie UK Equity fund gets very little attention given its size. It is popular among fund of funds managers – it is a top-10 holding in three of Cazenove's Multi-Manager range, including the Diversity fund, as well as in the Aberdeen Multi Manager funds.
It is possible to access it through platforms or directly with a minimum initial investment of £10,000.
The fund is managed by Majedie co-founders James de Uphaugh, Adam Parker, Chris Field and Matthew Smith. It has a long-term track record of outperformance that has won it five FE Crowns. Over the past decade it is the eighth-best performer in the sector, up 226.48 per cent compared with 134.09 per cent from the FTSE All Share. It is also top quartile over three and five years.
Unlike many of the top-performing funds in the sector it has retained a high weighting to the FTSE 100 – although it is still underweight – of 61.4 per cent. It holds 11.6 per cent in the FTSE 250 and 13.3 per cent foreign stocks along with smaller amounts of small caps and AIM holdings.
The fund is a selection on the AFI Balanced and Aggressive indices. Ongoing charges are 1.53 per cent.
Unicorn Outstanding British Companies
The £21m Unicorn Outstanding British Companies fund is one of the lesser-known portfolios of FE Alpha Manager John McClure.
He runs it with Chris Hutchinson, also an FE Alpha Manager. Together they have steered the fund in to the top quartile of the IMA UK All Companies sector over three and five years.
Data from FE Analytics shows the fund has made 53.77 per cent over the last three years while the FTSE All Share has grown just 32.96 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
The managers look for companies that are leaders in their respective fields and have a strong competitive position that minimises the risk of holding them.
This way they have managed to build a portfolio that has a lower volatility than the market, despite holding just 24 stocks.
It is an unconstrained fund, and the managers are happy to hold stocks from both the upper and the lower end of the market.
It has ongoing charges of 1.7 per cent and is available with a minimum initial investment of £2,500.
In a previous article in the series, FE Trustnet looked at some of the lesser-known UK Equity Income funds tipped by the AFI panel.
