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There is a new management team on board for the £16.9m Swip North American Smaller Companies fund, with Ian Tabberer, Simon Moss and Nick Ford taking over from erstwhile manager Patricia Wilson last year.

While it is still early to assess their collective performance - Mr Tabberer joined the fund in April 2007, while Mr Moss and Mr Ford started in February and September, respectively - the fund is managed largely in the same way Ms Wilson managed it. The new managers generally follow the Swip investment process, working alongside nine sector analysts responsible for presenting stock recommendations and providing independent investment research.

Although the team does draw on independent houses, mainstream Wall Street brokerage firms, management meetings and annual reports, this information is generally used as background. Each “buy” recommendation, modelled on expectations of revenue and profitability over a five-year forward-looking timeframe, is based on the analysts’ own research.

Mr Tabberer, Mr Moss and Mr Ford act as portfolio constructors, deciding which stocks ultimately make their way into the fund and at which weighting.

Although this set up is more or less the same as it was under Ms Wilson, two notable changes have been made to the fund’s modus operandi. The first and most obvious is the fact it has moved from a single-manager approach to a team-based one. "We’ve all got different strengths and weaknesses,” says Mr Tabberer. “We feel the best way to run the fund is through a team approach.”

The second, interrelated change is that the new management team tends to use quant screens far less than Ms Wilson did.

“One of the things the new team is keen on now is capital-cycle analysis, where we try to invest in areas where capital has been taken out of an industry and the projections for profitability are therefore improving because there is less competition,” Mr Tabberer says. “In terms of stock selection, we are looking for areas where forward profitability is starting to improve because there is a degree of pricing power within a sector or a specific company model.”

According to Morningstar, the fund achieved a cumulative return of 0.14 per cent for the year to 5 May, compared with the sector’s average loss of 7.3 per cent over the same period. Over the last three years, it returned 35.91 per cent against the sector’s 28.93 per cent, while over the last five it returned 64.48 per cent against the sector’s 53.62 per cent.

On a discrete annual basis, the fund has outperformed the sector median four of the last five years, with the notable exception of 2006, when it slipped into the fourth quartile, losing 9.09 per cent compared with the sector’s average loss of 2.23 per cent. This blip, according to Mr Tabberer, was the result of an early call on financials and consumer discretionary stocks.

“We took the decision to move to a more cautious stance, going underweight financials and consumer discretionary with the belief that there were a number of problems arising with the housing sector,” he says. “In discrete terms, we were early in making this call, and that led to the underperformance. However, we are investing over the long term, and we have more than made up for 2006 by the fact we outperformed the index by 21 per cent in 2007.”

The fund’s largest overweight positions - 3.8 per cent in industrials and 3.7 per cent in healthcare - have also been held for approximately the same amount of time. The fund has been overweight industrials for the last three years, healthcare for the last two.

The portfolio’s largest position, a 4.2 per cent holding in Correction Corp, a provider of penitentiary services, has been held for more than two years. At a time when the US prison population is rising, the company has benefited from the fact that barriers to market entry are quite high due to capital requirements and the amount of time it takes to build relationships with states. Correction’s share price has risen from about $15 (£7.70) to $25 in two years.

The second-largest holding, a 3.9 per cent position in New York Community Bankcorp, has also been held for about two years. Analysts believed the company, which was paying a 10 per cent dividend at the time, was significantly undervalued, as it was “priced for the inverted yield curve to continue for a number of years”. Last year, its share price was up by 17 per cent, a far cry from the S&P Banking index’s 25 per cent loss over the same period.

The third-largest holding, a 3.8 per cent position in FMC Technologies, which designs sub-sea systems for the offshore gas and oil industry, is a relatively recent addition, brought in at start of this year. Analysts had been following the company for some time, but they had thought it too expensive. When its share price came down in January, the managers added it to the portfolio, and its share price has increased by 57 per cent since.

The fund is slightly more expensive than its peers, with an initial charge of 5 per cent, an annual charge of 1.5 per cent and a total expense ratio of 1.71 per cent, compared with the sector’s average TER of 1.69.