HL Multi-Manager Special Situations Trust Class A - Accumulation (GBP)

The managers have outperformed the IA Global sector and the MSCI AC World Index over the long term. With a bias to the UK, the trust tends to perform particularly well when UK equities are strong.

The trust's bias to UK smaller company funds led it to underperform in 2008 when smaller companies suffered and the UK market fell further than many markets across the globe. This same positioning helped the fund through the subsequent recovery but highlights the higher-risk nature of investing in smaller companies.

The trust has relatively low exposure to the US as Roger Clark and Lee Gardhouse feel there are few managers able to consistently add value in this area. This was helpful to the fund's performance prior to the financial crisis as US stocks performed poorly relative to other areas but has acted as a slight drag on returns since. However the trust has produced excellent returns, aided by strong performance within the trust's UK exposure. Please remember past performance is not a guide to future returns.

Exceptional fund managers are few and far between, but can be identified through a combination of detailed quantitative and qualitative analysis.

The managers examine the entire market in search of the best stock-picking talent, focusing on those with proven track records able to invest without constraint. There is a specific focus on managers that either own the fund management group or are properly incentivised to deliver long-term outperformance.

The portfolio is constructed around managers with strong stock-picking ability; the sector and geographical positioning of the trust is a secondary concern.

The trust invests predominantly with "boutique" investment houses where managers invest their own money alongside investors'. Interesting opportunities arise when experienced, well incentivised managers set up their own company and are able to benefit from a clean slate and a small, nimble fund in which to showcase their abilities.

Hargreaves Lansdown has developed a proprietary analysis tool covering in excess of 2000 funds and fund managers. This is used to understand why a fund performs as it does, with the aim of identifying fund managers able to add value within their areas of the market. The team utilises this to shortlist funds worthy of further consideration in the form of face-to-face meetings. These meetings explore a multitude of aspects regarding the fund and its manager including people, process, philosophy, portfolio construction and incentivisation. This allows the team to gain a deep understanding of each fund which aids the managers in compiling a portfolio which has a balance of investment styles.

The trust has a bias to funds in the UK as the managers have identified a number of successful stock pickers in this area. Roger Clark and Lee Gardhouse feel strong stock pickers can be particularly successful investing within small and medium-sized companies as they tend to be less researched than their larger counterparts. The fund therefore has around half the portfolio invested in higher-risk small and medium-sized companies.