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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.

Dominic Rowles - Investment Analyst
01 July 2017

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 260 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 such as 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

Investors contended with a number of global political uncertainties over the past year including Donald Trump’s victory as US President, a flurry of European elections, a snap UK general election and ongoing Brexit negotiations. Even so, UK stock markets still managed to reach all-time highs and the FTSE All-Share Index grew 18.1%. Past performance is not a guide to the future.

The UK’s vote to leave the European Union caused Sterling to weaken against most major world currencies. Larger companies, which earn a greater portion of their earnings overseas, therefore outperformed more domestically-orientated small and medium-sized companies immediately following the referendum. However, the share prices of small and medium-sized companies quickly recovered from these initial falls, and companies of all sizes have since performed well due to improving confidence in the UK economy.

Small, medium-sized and larger companies – one year performance

Past performance is not a guide to future returns. Source: Lipper IM to 30/06/2017.

Annual percentage growth
Jun 12 -
Jun 13
Jun 13 -
Jun 14
Jun 14 -
Jun 15
Jun 15 -
Jun 16
Jun 16 -
Jun 17
FTSE 100 TR 15.8% 12.3% 0.2% 3.8% 16.9%
FTSE 250 TR 32.2% 17.8% 15.0% -5.7% 21.5%
FTSE Small Cap TR 38.6% 25.3% 8.4% -3.7% 28.4%

Investors have largely sought companies with dependable earnings and growth potential since the 2008 financial crisis. These are often companies where demand for their products or services is unlikely to fall, regardless of the prospects for the wider economy, such as those in the consumer goods and pharmaceuticals sectors. Funds with a bias towards these sectors have generally performed well over the past few years.

However, in the latter half of last year, investors shunned these businesses in favour of more undervalued and economically-sensitive areas of the market, such as those in the commodity-related sectors, benefiting funds with a bias towards companies in these areas. This trend has reversed again so far this year. Different styles of investing will move in and out of favour at different times and we feel this highlights the merits of a diversified portfolio, incorporating a variety of investment styles, sectors and sizes of company.

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

    +75.6%

  • FTSE All Share

    +65.2%

Source: Lipper IM to 30/06/2017. 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 July 2017. 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.

Some of these funds are concentrated portfolios, meaning each individual investment can contribute significantly to overall returns, which increases risk. Many also invest in smaller companies which are higher risk than their larger counterparts. For more information on the risks involved, please refer to the Key Investor Information Document (KIID) for the specific fund.

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

This fund draws on the expertise of four experienced fund managers. Each manager has a specific focus on large, medium-sized or higher-risk smaller companies and their best ideas are blended together to form a high-conviction and concentrated portfolio.

The fund outperformed the FTSE All-Share over the past year, helped by a bias to strongly-performing small and medium-sized companies combined with good stock selection, according to our analysis. The managers increased exposure to the financial sector and this also proved beneficial. The potential for this fund to outperform its benchmark over the long term is strong, in our view.

Alex Wright adopts a contrarian approach to investing. He looks for unloved and undervalued companies where other investors have overlooked the potential for growth or positive change.

The manager specialises in investing in higher-risk small and medium-sized companies and, according to our analysis, this is where he has added the most value throughout his career. The fund’s bias towards financials paid off over the past year and helped the fund outperform the FTSE All-Share. The fund has little exposure to the consumer goods sector. This sector has remained popular with investors in recent years and means it is not a natural hunting ground for a contrarian investor such as Alex Wright. He also has the ability to short companies (using derivatives) to make money when the share price falls, which adds risk.

The fund is managed by a team of five, each with specific attributes intended to complement those of other team members. The team seeks robust businesses that have been overlooked and undervalued by other investors.

The contrarian approach adopted by the managers, combined with the fund’s bias towards higher-risk small and medium-sized companies, makes this fund different to many of its peers. The fund performed well over the past year, boosted by its exposure to mining companies such as Rio Tinto, BHP Billiton and Anglo American. The managers have since taken profits from this area and reduced exposure following the period of strong performance.

Nigel Thomas invests in companies of all sizes that he believes have good long-term growth prospects. He also looks at unloved areas of the market where he feels growth prospects are under-appreciated by other investors.

The fund has performed in line with its benchmark over the past year, although Nigel Thomas is one of the UK’s longest-standing fund managers and has an exceptional long-term record of outperformance, achieved through outstanding stock selection. The fund’s largest sector exposures are industrials and consumer services while the manager is finding relatively few opportunities in the financials and consumer goods sectors.

Richard Buxton seeks out-of-favour companies he believes will benefit from change that is yet to be recognised by the market. He aims to invest in companies with a long-term view.

The fund outperformed the FTSE All-Share over the past year despite a bias towards larger companies which slightly underperformed their smaller counterparts. The manager’s contrarian style boosted performance when the undervalued companies he invests in became popular amongst other investors towards the end of 2016. We believe the fund represents a good choice for exposure to larger companies.

Nick Train is the consummate long-term investor. He ignores short-term headwinds and scours the market for companies with unique market positions and strong brands, capable of standing the test of time.

Nick Train seeks companies with dependable earnings and superior growth potential. This type of company proved popular for several years prior to mid-2016 and benefited the fund’s performance. In the latter half of last year, investors shunned these businesses in favour of some of the more undervalued and economically-sensitive areas of the market and the fund therefore underperformed the broader UK market over this time, although the trend has reversed again so far this year.

The fund invests exclusively in medium-sized UK businesses. The manager looks for attractively-valued companies with strong, shareholder-friendly management, robust balance sheets and sustainable business models.

Medium-sized companies have performed well over the past year and Paul Spencer’s astute stock picking also added value for investors, according to our analysis. Thermal processing services company Bodycote and veterinary product provider Dechra Pharmaceutical were among the fund’s best performing investments. In our view this fund is an excellent choice for exposure to medium-sized British companies.

Tom Dobell ignores economic noise and focuses on the prospects for individual companies. He seeks unloved companies that have fallen out of favour with investors but where there is scope for a change in fortunes.

The fund outperformed both its peers and the FTSE All-Share over the past year, although past performance is no guide to the future. This excellent performance was partly due to the manager’s astute stock selection, according to our analysis. The manager’s contrarian investment style also boosted performance when previously unloved and undervalued companies became popular with investors towards the end of 2016.

The fund aims to track the performance of the FTSE All-Share; a broad index of UK companies.

The fund provides exposure to around 660 large, medium-sized, and higher-risk smaller companies based across the UK. Since launch it has tracked its index tightly and efficiently.

The manager aims to identify opportunities that have been missed by other investors and has the ability to short investments (using derivatives) in order to make money when the value of a share falls, which adds risk.

The fund has performed well over the past year aided by strong stock selection, according to our analysis. Ed Legget has a good track record, although prior to taking over this fund in 2016 he previously ran a UK portfolio at Standard Life where ideas for the fund were produced by all team members. At Artemis we feel each fund is more reliant on the input of individual managers and believe he is yet to prove himself as a standalone manager. We would like to see how he adapts to this new format for a longer period before considering this fund for the Wealth 150.

The manager aims to build a portfolio of best-in-class companies which have predictable earnings and cash flow, a growing market in which to sell their products, a competitive market position and an experienced senior management team.

This concentrated fund has a bias to higher-risk small and medium-sized companies. Chris Hutchinson has a good track record of adding value through astute stock selection according to our analysis. The fund also remains relatively small compared to others in the sector making it more dynamic than larger peers. However, the manager’s track record is shorter than our favoured managers in this sector and we feel we already have a good and extensive list of UK funds on the Wealth 150.