Gartmore has announced that Gervais Williams is to leave the company, and management of their UK & Irish Smaller Companies Fund has passed to Adam McConkey with immediate effect. Adam McConkey joined Gartmore in 2000 and prior to taking up this role he was already a senior investment manager within the UK Smaller Companies team.
We had recently suggested clients consider switching out of this fund following a period of poor performance. Our analysis suggested the fund’s restrictive approach was hampering returns. For example, the managers typically sell holdings in companies which expand beyond a certain size to ensure all the companies within the portfolio fit with the "smaller companies" mandate. This has resulted in the fund missing out on some positive performance as some medium-sized companies sold from the portfolio have gone on to perform strongly.
Despite the change in manager the fund will continue to be run on a similar basis. We can therefore see no reason why performance will improve. We continue to believe investors looking for a superior alternative within the sector should consider the Standard Life Investments (SLI) UK Smaller Companies Fund.
The manager of this fund, Harry Nimmo, is in our view one of the best stock pickers in the industry. He likes companies that are managed by their original owners or where the chief executives have been there a long time, signalling the management’s commitment to the business. If he gets it right, which he frequently has, and a company grows in value to become a medium-sized company, he will run with these winners, benefitting from their long term success.
He also looks for companies with proven business models and recurring revenues, an approach that has served him well over the long term. Over the past five years the fund has returned 80.9%, making it the best-performing fund in the sector. This compares to 12.9% for the average fund in the sector and a loss of 5.2% for the Gartmore UK & Irish Smaller Companies Fund. Please remember that past performance is not a guide to future returns and investing in smaller companies is higher risk. Given the quality of the manager, we believe the SLI UK Smaller Companies Fund is well placed to deliver excellent long-term returns.
| % Growth 01/09/2005 to 01/09/2006 | % Growth 01/09/2006 to 03/09/2007 | % Growth 03/09/2007 to 01/09/2008 | % Growth 01/09/2008 to 01/09/2009 | % Growth 01/09/2009 to 01/09/2010 | |
|---|---|---|---|---|---|
| Standard Life Inv UK Smaller Companies Ret Acc | 29.03 | 29.29 | -11.04 | -10.41 | 36.01 |
| Gartmore UK & Irish Smaller Companies Ret Acc | 5.78 | 16.4 | -22.23 | -4.19 | 3.39 |
| IMA UK Smaller Companies | 13.38 | 19.37 | -21.08 | -7.54 |
14.26 |
Past performance is not a guide to the future. Source: Lipper Hindsight.
Key Features of the SLI UK Smaller Companies FundThe value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
