InvestmentsAug 28 2018

The best UK funds of the past five years

  • To learn about how UK companies funds have performed
  • Understand the growth drivers
  • Be able to describe the sector's challenges
  • To learn about how UK companies funds have performed
  • Understand the growth drivers
  • Be able to describe the sector's challenges
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The best UK funds of the past five years

The disparate nature of the UK All Companies sector can also mislead fund selectors in another way. The exodus of money from UK strategies has been a feature of the past two years, and was the subject of Money Management’s cover story in February. 

This trend, which has accelerated over the past six months – outflows for the first half of this year are already well in excess of 2017’s full-year figure – is being driven by several factors. But the numbers are arguably skewed by the travails of several income funds that would usually sit in the UK Equity Income sector.

Funds such as Woodford Equity Income and the Invesco Income funds run by Mark Barnett, all of which have been ejected from the UK income sector for failing to meet yield requirements, have shed more than £3bn between them this year, according to FE estimates. This accounts for virtually all the outflows from the UK All Companies sector over the same period.

There are other big names suffering outflows in the sector. Axa Framlington UK Opportunities has seen money continue to depart in 2018, the imminent departure of longstanding manager Nigel Thomas is likely weighing on investors’ minds as much as recent underperformance. 

Richard Buxton’s UK Alpha fund has also seen outflows over the past three months, though this is a short-term phenomenon for now.

Certain passive funds have seen redemptions, too, and iShares’ figures perhaps provide a clue as to investors’ thoughts for the coming months. Over the past half year, the iShares 350 UK Equity tracker, which invests in companies across the market-cap spectrum, has shed £665m. But the firm’s mid and large-cap trackers have attracted roughly the same amount between them, suggesting that bigger companies are seen as a safer bet.

Given most managers in the table focus on small and mid-cap shares, it’s not surprising that domestic stocks feature prominently in their portfolios. And, as Table 1 shows, performance has been particularly good over the past two years.

The year which stands out, however, is the 12 months to 31 July 2016 – encompassing both the run-up to the EU referendum and the fall for domestic stocks in the immediate aftermath. 

Most of these shares recovered their poise later in the year, but some of the statistics in the table are eye-catching. For example, the 25 per cent fall for James Henderson’s Janus Henderson Opportunities Trust, though it has comfortably been recovered since, may indicate the volatility of his sizeable number of Aim holdings.

A recurring question

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