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UK All Companies

UK All Companies sector

We believe this sector is blessed with a number of skilled and high-quality fund managers.

Kate Marshall - Investment Analyst
01 November 2016

A fund investing in UK shares is often the first port of call for most UK-based investors. The UK stock market is home to many world-class companies, from international giants to a diverse array of smaller businesses. This provides a rich hunting ground for fund managers in this sector. However, with such variety on offer and almost 270 UK funds from which to choose, investors need to ensure a fund is right for their circumstances before investing.

Funds in this sector aim to grow the value of investors’ capital over the long term, although each will go about this in different ways. Some focus on larger companies in the FTSE 100 Index; others will invest in higher-risk smaller or medium-sized companies; and some have the flexibility to invest in companies of any size.

Similarly, some fund managers are more constrained than others. Some aim not to deviate significantly from the return of the benchmark. Others have more freedom and will take more risks – they may invest in a concentrated number of shares, sectors, or types of business, for example.

Our view on the UK All Companies sector

In our view, investors should disconnect the economic outlook from the prospects of individual companies. Indeed, the UK stock market has performed well over the past year, despite the uncertainty surrounding the UK’s prospective exit from the EU and its potential impact on the economy.

It is often easy for investors to overlook opportunities on their doorstep, however we believe the UK is full of home-grown investment talent. The UK All Companies sector is blessed with a number of skilled and high-quality fund managers, although the decision of which ones to choose proves difficult for many. We have scoured the market to identify those we believe have the greatest potential to excel over the long term and our favourites feature on the Wealth 150. Our history of managing and selecting UK funds has been met with great success.

Within our Wealth 150 we have aimed to include a mix of funds with different investment strategies and areas of focus, which we believe will deliver good returns for investors over the long term. Different investment styles will come in and out of favour in the shorter term and, therefore, as part of a wider UK portfolio we would suggest investing in a selection of UK funds using different approaches.

Investors who would prefer to leave the decision making to the experts may wish to consider funds like the HL Multi-Manager UK Growth Fund. The fund combines what we believe to be the best managers from across the UK All Companies, UK Equity Income and UK Smaller Companies sectors. The fund benefits from our in-house research and, in our view, it could make a great core UK growth fund. We feel the additional costs associated with running a multi-manager fund are justified by the benefits of this approach.

The HL Multi-Manager funds are managed by our sister company HL Fund Managers.

View HL Multi-Manager UK Growth key features

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Our favourite funds in this sector

First-class performance potential and low management charges

View the Wealth 150

It has been a volatile year for the UK stock market. In early 2016, markets fell amid concerns over slowing growth in China and its impact on the rest of the world. The stock market subsequently recovered, but stumbled once more after the UK voted to leave the European Union in June, although there was a marked difference in the performance of small and larger businesses. Small and medium-sized companies, which are more exposed to the health of the UK economy, saw their share prices fall sharply. However, the share prices of the UK's largest firms, which derive a greater proportion of their earnings overseas, fell to a lesser extent.

Funds with a bias towards small and medium-sized businesses therefore bore the brunt of the stock market falls, while funds focused on larger businesses offered some resilience. These markets have since rebounded, however, and many UK funds have recovered their losses.

The average fund in the UK All Companies sector underperformed the broader UK market over the past year. Many funds have avoided the shares of commodity-related businesses, which saw a recovery in performance, and have maintained a bias to small and medium-sized companies, which proved a strain on performance. Our analysis suggests small and medium-sized companies have tended to outperform their larger counterparts over the long term, although smaller businesses are also more volatile. We feel it is sensible to maintain a portfolio of companies of all sizes in order to spread risk.

Given the uncertainties surrounding the UK’s exit from the EU, stock market performance could remain volatile in the short term. However, the UK is home to many great companies that have stood the test of time and we believe investors in the stock market will ultimately be rewarded over the long term, although there are no guarantees.

UK stock market and sector average - one year performance

Source: Lipper IM to 01/11/2016. Past performance is not a guide to future returns.

Annual percentage growth
Nov 11 -
Nov 12
Nov 12 -
Nov 13
Nov 13 -
Nov 14
Nov 14 -
Nov 15
Nov 15 -
Nov 16
FTSE All-Share 13.9% 21.2% 0.2% 3.9% 11.6%
IA UK All Companies 14% 26.5% 0.2% 6.6% 8.1%

Source: Lipper IM to 01/11/2016. Past performance is not a guide to future returns.

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Five year performance

  • IA UK All Companies sector

    +66.7%

  • FTSE All Share

    +60.3%

Source: Lipper IM to 01/11/2016. Please remember past performance is not a guide to future returns.

Our favourite funds in the sector

We undertake a comprehensive review of every sector. Here we provide comments on a selection of funds of interest following our most recent UK All Companies sector review. They are provided for your interest but are not a guide to how you should invest. If you are unsure of the suitability of an investment for your circumstances seek personal advice. Comments are correct as at November 2016. Remember all investments can fall as well as rise in value so investors could get back less than they invest. Past performance is not a guide to the future.

Please ensure you read the Key Investor Information Document or fund Key Features for any fund you are considering.

To view a full list of our favourite funds within the sector, visit the Wealth 150. There is a tiered charge to hold funds in the Vantage Service with a maximum of 0.45% p.a. - view our charges.

Other funds in the sector

Here we look at some other funds of interest following our most recent sector review. Please note the review period may be over a short time period and past performance is not a guide to future returns.

Source for performance figures: Financial Express

Chris St John has the flexibility to invest in companies of all sizes. He seeks to identify economic themes and the areas of the stock market most likely to benefit as the theme develops. He then selects the businesses he feels hold most promise.

A bias towards companies generating more of their earnings domestically in the UK, compared with those larger businesses with greater overseas exposure, hurt performance following the UK vote to leave the EU. However, throughout his career, including managing other portfolios, Chris St John has added significant value through his stock selection across companies of all sizes, according to our analysis. The potential for him to outperform his peers over the long term is strong, in our view.

Steve Davies combines his views on the economic environment with an analysis of underlying company prospects to construct this portfolio. He is contrarian and seeks to take advantage of opportunities other investors may have overlooked.

With a bias towards UK banks and other companies reliant on domestic consumer spending, such as housebuilders, airlines and travel and leisure operators, the fund underperformed the broader UK market following the EU referendum. Despite the volatility, Steve Davies maintained conviction in these companies and added to favoured holdings at more attractive prices. His contrarian approach means we would expect the fund to experience periods of volatility, although we feel long-term investors could be rewarded for their patience.

Kames has demonstrated a long-term commitment to ethical investing. This fund invests in companies meeting strict ethical criteria.

Tobacco and pharmaceutical companies are excluded from Audrey Ryan’s investment universe and the fund also has limited exposure to mining and oil & gas companies, which have performed well this year. The fund’s limited investments in these areas was negative for performance, as was its bias to domestically-focused small and medium-sized companies. Exposure to financial companies and consumer-services businesses also dragged on returns. Despite this short-term setback, long-term performance has been impressive and we feel Audrey Ryan is one of the few managers to have handled the constraints of an ethical fund well over the long term. This fund holds shares in Hargreaves Lansdown plc.

The managers seek companies with intellectual property, strong distribution channels and/or significant recurring business. They invest in UK businesses of all sizes.

While the fund has a bias to higher-risk small and medium-sized companies, investments in several large and internationally-diverse companies, such as Unilever, Diageo and GlaxoSmithKline, have benefited performance over the past year. Our analysis suggests strong strong-picking has driven long-term performance and a focus on high-quality businesses that the managers believe will thrive even in difficult market conditions has proven beneficial.

This fund predominantly invests in medium-sized companies in the FTSE 250 index, although the manager also has some flexibility to run his winners as they progress to the FTSE 100 of larger companies.

It has been a turbulent year for the UK’s medium-sized companies, which are typically more closely tied to the fortunes of the UK economy than their larger counterparts. The fund has not been immune from the volatility, although it has outperformed the FTSE 250 index over the year to 1 November 2016. Over the long term the manager, who has the support of Old Mutual’s talented small and medium-sized company team, has added considerable value for investors.

This fund re-launched earlier this year with newly-appointed manager Philip Rodrig's at the helm. The manager has the flexibility to invest across small, medium-sized and larger companies.

While the fund has outperformed its peers under Philip Rodrigs management, a bias towards medium-sized and more domestically-focused consumer companies means the fund has underperformed the broader UK market. That said, most of this underperformance occurred in the weeks following the EU referendum, and performance has since improved. Over the longer term our analysis suggests the manager has added value through stock selection and we remain excited about the fund’s longer-term prospects.

The team’s unconstrained approach means they are able to invest in companies of all sizes. They aim to identify good value companies with underappreciated growth prospects.

A bias to domestically-focused medium-sized companies has proved a strain on the fund’s performance over the past year. In particular, significant exposure to housebuilders and other companies dependent on consumer spending hurt the fund in the aftermath of the EU referendum. The team used this period of share price weakness to add to favoured investments. While the fund has tended to be more volatile than its peers, we feel the team’s flexible approach enhances their ability to add value through astute stock-picking over the long term.

Julie Dean invests based on where she feels we are within the economic cycle, looking to invest in more financially-robust companies during a slowdown, and companies able to benefit from an improving economy during a recovery.

The fund’s relatively high weighting in domestically-focused medium-sized companies negatively impacted performance in the immediate aftermath of the UK’s vote to exit the EU. While the fund maintains some exposure to more economically-sensitive areas of the market, the manager is currently relatively cautious in her outlook and a greater portion is invested in companies the manager would classify as defensive businesses. The fund also holds a higher level of cash at around 10%.

Mark Slater analyses the long-term prospects for individual companies rather than the short-term impact of unpredictable wider economic issues. The majority of the fund invests in small and medium-sized companies.

The fund’s bias to smaller businesses, including investments in a number of property companies and other domestically-focused firms, proved a strain on performance in 2016. We have long held the view that this fund’s focus on smaller companies, combined with a concentrated number of investments, makes it a higher-risk proposition and would expect it to go through periods of underperformance. That said, Mark Slater has delivered strong long-term returns for investors aided by good stock selection, according to our analysis. While we believe long-term, patient investors will be rewarded by the manager’s stock-picking ability, we feel we already have a strong line-up of managers focused on small and medium-sized UK companies on the Wealth 150.

Andrew Jackson seeks companies underappreciated by other investors, but whose prospects he feels are improving. Overall the fund has a bias to higher-risk small and medium-sized companies.

Andrew Jackson took over management of this fund in July 2016. His investment approach has proved successful in the past when managing other portfolios, although there is no guarantee of future performance. Similar to the previous managers, Andrew Jackson determines the value of a company’s shares before considering an investment, although we feel he is slightly less sensitive to a company’s valuation. We feel the Wealth 150 already features a number of high-quality fund managers. Furthermore, while Andrew Jackson has already made a number of changes, he intends on altering the portfolio further. We would prefer to monitor performance for a longer period and once the changes are complete before considering the fund for the Wealth 150.