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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
28 Feb 2018

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.

UK All Companies funds 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

The UK is currently one of the world’s most unloved stock markets, according to our research. Uncertainty caused by Brexit and political turmoil means many people are cautious in their outlook.

We believe many companies have the ability to survive and prosper through any economic and political malaise. In fact, the UK stock market has performed well over the past year and we remain positive about its future prospects. Our stock market is truly diverse, with many companies making money both overseas and on home soil.

Not only that, the UK is home to some exceptional fund managers with great track records of adding value for investors.

The decision of which managers to invest with can be difficult and that’s why we’ve carried out some of the hard work on investors’ behalf. 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 selecting UK funds has met with great success.

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 Investor Information

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

The UK stock market breached record highs and gained 11.3% over the past year as investors set aside concerns over Brexit and the UK’s uncertain political outlook. UK companies of all sizes made money over the period, but higher-risk small and medium-sized businesses outperformed their larger counterparts, which benefited funds with exposure. Of course, past performance should not be seen as a guide to the future.

The pound strengthened against most major overseas currencies, and this reduced the value of overseas earnings when they were converted back to the UK. This dragged on the share prices of larger companies, which typically earn a greater proportion of their income overseas.

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

Past performance is not a guide to future returns. Source: Lipper IM to 31/01/2018.

Annual percentage growth
Jan 13 -
Jan 14
Jan 14 -
Jan 15
Jan 15 -
Jan 16
Jan 16 -
Jan 17
Jan 17 -
Jan 18
FTSE 100 TR 7.5% 7.4% -6.5% 21.4% 10.4%
FTSE 250 TR 23.5% 6.9% 3.7% 13.2% 14.6%
FTSE Small Cap TR 26.0% 1.3% 1.5% 22.9% 16.4%

Past performance is not a guide to future returns. Source: Lipper IM to 31/01/2018.

Investors have recently shunned companies whose prospects rely on the health of the UK economy and favoured those with overseas earnings. Funds biased towards UK-centric businesses therefore underperformed those investing in international businesses over the period. We believe many UK-focused companies currently offer good value, and that funds with exposure could perform well if the outlook for the UK improves.

That said, we feel it is sensible to maintain a portfolio of companies of all sizes, earning money both in the UK and overseas, as this increases diversification and reduces the risk of being fully invested in a poorly performing area.

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

    +59%

  • FTSE All Share

    +50.3%

Source: Lipper IM to 31/01/2018. 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 January 2018. 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 with HL. It is 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

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 smaller companies also helped it outperform the broader stock market over the past year, according to our analysis. One of the most recent success stories was bookmakers Ladbrokes Coral, which features amongst the fund’s 10 largest investments. The company’s share price rallied after it was subject to a takeover offer from competitor GVC Holdings. Alex Wright also has the ability to short companies (using derivatives) to make money when share prices fall, which adds risk.

Anthony Cross and Julian Fosh seek companies with barriers to entry from competition including intellectual property (such as patents, trademarks or brands), established distribution channels and significant levels of repeat business. They invest in UK businesses of all sizes.

The managers focus on high-quality businesses, which are often capable of performing well in any economic environment. Indeed, the fund has historically provided some shelter for investor’s capital when share prices are falling, and performed in line with the benchmark when they are rising. The fund marginally outperformed the broader stock market over the past year as a result of the managers’ ability to select companies with strong prospects, according to our analysis. Their stock picking was particularly strong amongst companies in the industrials sector, an area to which the fund is biased.

Julie Dean invests based on her economic outlook. She seeks to invest in more financially robust companies during a slowdown, and companies able to benefit from an improving economy during a recovery.

Julie Dean is cautious on the prospects for the UK economy and has positioned the fund towards out of favour and lowly-valued companies, which she believes are less likely to perform poorly in a downturn. These companies have largely remained unloved and this positioning has dragged on returns over the past few years. That said, the manager has previously shown an ability to add value by selecting companies with the best prospects, and we believe her fund could bring diversification to a portfolio. It retains its place on the Wealth 150 but we will continue to monitor performance and update investors if our views change.

Paul Spencer looks for attractively-valued companies able to stand the test of time with shareholder-friendly management and robust financials. The fund invests exclusively in medium-sized UK businesses.

The fund performed well over the past year, significantly outperforming the broader medium-sized companies market. Our analysis attributes this to the manager’s ability to select companies with outstanding prospects, and avoid weaker-performing businesses. Performance was boosted when two of the fund’s investments received takeover offers from larger rivals, and their share prices subsequently rallied. In our view, this fund is an excellent choice for exposure to the UK’s medium-sized companies and we expect it to perform well over the long term, although there are no guarantees.

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.

The fund has performed well both over the past year and over the longer term as a result of the manager’s ability to select companies with bright prospects. The fund’s current themes include companies that are challenging traditional ways of doing business, many of which do not own any physical assets, which helps keep costs down. Online estate agency Rightmove, for example, has combined an industry previously fragmented by thousands of estate agents. We believe this fund will perform well over the longer-term, although there are no guarantees.

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.

James Baker and David Taylor look for companies with high cash flow, sensible senior management teams and a competitive advantage, such as a unique product, or a unique market position.

The fund performed exceptionally well over the past year, boosted by the managers’ ability to select future winners. According to our analysis, the managers’ stock picking was particularly strong in the industrials sector, an area to which the fund is biased. Although the managers are forging a good track record, many of our favourite managers investing in small and medium-sized companies have significantly longer track records, hence the fund does not currently feature on the Wealth 150. We will continue to monitor performance and inform investors if our views change.

Kevin Murphy and Nick Kirrage are contrarian investors. They seek to invest in sound companies that have been unloved and overlooked by other investors, but where there is scope for a recovery.

The fund underperformed the broader UK stock market over the past year as the managers’ investment style, and the undervalued companies they invest in, remained out of favour. The managers’ long term track record remains impressive but is shorter than that of our favoured managers, some of whom implement a similar investment strategy. The fund does not currently feature on the Wealth 150 list of our favourite funds in the major sectors.

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Investment notes

Please note the research updates are not personal recommendations to trade. If you are unsure of the suitability of an investment for your circumstances please seek advice. Remember all investments can fall as well as rise in value so investors could get back less than they invest.

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