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UK Growth sector

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

Dominic Rowles - Investment Analyst
24 January 2020

A fund investing in UK shares is often the first port of call for UK-based investors.

And for good reason. The UK stock market is home to many world-class companies. From international giants to a diverse array of smaller businesses. It’s a rich hunting ground for fund managers.

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

Our view

The UK is currently one of the world’s most unloved stock markets. While a clear Conservative majority in parliament removes a layer of uncertainty, there are still a variety of paths Brexit could take. It's possible we could see more volatility as details emerge.

However, we think many homegrown companies have the ability to survive economic and political issues. 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 funds to invest in can be difficult. We’ve narrowed the field to those we think have the greatest potential, which feature on the Wealth Shortlist.

Investors who’d prefer to access a number of funds in a single convenient investment may wish to consider the HL Multi-Manager UK Growth Fund. It combines what we think are the best managers from across the UK Growth, UK Equity Income and higher-risk UK Smaller Companies sectors. The fund benefits from our in-house research and we think 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. The funds do not form part of the Wealth Shortlist.

View HL Multi-Manager UK Growth Fund 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.

Wealth Shortlist funds in this sector

Funds chosen by our analysts for their long-term potential

SEE THE WEALTH SHORTLIST

The UK stock market rose 19.2%* in the 12 months to the end of December. Companies of all sizes rose strongly, but medium-sized companies delivered the best return. Remember past performance isn’t a guide to the future.

Annual percentage growth
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
Dec 17 -
Dec 18
Dec 18 -
Dec 19
FTSE 100 -1.3% 19.1% 11.9% -8.7% 17.3%
FTSE 250 12.0% 5.1% 18.2% -15.2% 30.8%
FTSE Small Cap 13.0% 12.5% 15.6% -13.8% 17.7%
FTSE All-Share 1.0% 16.8% 13.1% -9.5% 19.2%

Past performance is not a guide to future returns. Source: *Lipper IM to 31/12/2019.

Technology companies were some of the best performing across the UK stock market over the past year. Investors also favoured companies in the industrials and real estate sectors. But telecoms and oil & gas companies didn’t do so well.

We think it’s sensible to invest in companies of all sizes across a number of industries. 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.

We regularly review all the main investment sectors. Here we provide comments on a selection of funds in the UK Growth sector. They’re provided for your interest but are not a guide to how you should invest. If you’re unsure if an investment is right for you, seek personal advice. Comments are correct as at 31 December 2019.

For more information, please refer to the Key Investor Information Document for the specific fund risks. 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.

Our Wealth Shortlist features a number of funds from this sector, selected by our analysts for their long-term potential. There is a tiered charge to hold funds with HL. It is a maximum of 0.45% a year – view our charges.

Wealth Shortlist fund reviews

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 looks for economic themes and invests in companies with the potential to benefit as the theme develops. He'll invest in companies of any size, including higher-risk smaller ones.

The fund's performed well over the long term and over the past year. Our analysis puts this down to the manager's ability to invest in companies with bright futures ahead of them, whatever size they are or sector they're in. One of the fund's strongest performers over the past year was media business Future. Its shares rose strongly, boosted by a sharp rise in annual revenue after it increased its presence in the US market.

The fund's current themes include companies set to benefit from a rise in e-commerce. GB Group, for instance, helps other companies verify their customer's identities before they purchase online products. Demand for their service is expected to increase as e-commerce becomes ever more popular.

Please note the AXA WF Framlington UK Fund is an offshore fund so investors will not be protected by the Financial Services Compensation Scheme.

This fund is managed by a team of three. Each has a set of skills that complements the other team members. They look for strong businesses that have been overlooked and undervalued by other investors.

The fund underperformed the broader UK stock market over the past year. Investors focused on companies with more reliable earnings and growth prospects. The fund hasn’t invested much in these companies because the managers think their shares are expensive when compared to their growth prospects. One of the fund's worst performers was utility company Centrica which faced a number of challenges including the UK energy price cap.

The contrarian approach used by the managers, combined with a focus on higher-risk small and medium-sized companies, makes it different to many of its peers. We think the fund’s managed by a strong team with the potential to deliver good returns over the long term.

Chris Hutchinson and his team invest in companies that do something unique. The harder it is for competitors to replicate, the better. So a strong brand, intellectual property and market leading position are all positives.

There aren't many companies that meet the manager's high standards and the fund currently invests in just 32 companies. This, combined with investments in smaller companies, adds risk. Smaller companies can also be more difficult to buy and sell (less liquid) than their larger counterparts.

The fund beat the performance of the broader UK stock market over the past year. And the manager's long term track record is impressive too. Our analysis suggests he's added plenty of value through his ability to select companies with outstanding potential, regardless of their size or the sector they're in. We think the fund has the potential to do well over the long run, 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 invests in around 630 large, medium-sized, and higher-risk smaller companies based across the UK. Since launch it’s tracked its index tightly and efficiently.

Alex Savvides looks for companies that have been through a tough time, possibly because the management team made some poor decisions, or because it's in an unloved area of the market. Either way, there must be scope for a turnaround.

Alex Savvides has managed this fund for over 11 years and it's done well over the long term. Our analysis puts this down to his ability to invest in companies destined for success. His stock picking was particularly strong in the financials and industrials sectors. Investments in medium-sized and higher-risk smaller companies have also done well over the long run, although there are no guarantees this will continue.

We think this fund is a reasonable choice for exposure to UK companies but it doesn’t currently feature on our Wealth Shortlist of funds. The UK's home to a good number of talented fund managers, and many of their funds are available at lower cost.

This fund invests in a relatively small number of companies and so carries more risk. It also comes with a performance fee (details of which can be found in the Key Investor Information Document).

Anthony Cross and Julian Fosh invest in 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, including higher-risk smaller ones.

The managers focus on high-quality businesses, which are often capable of performing well in any economic environment. The fund's historically provided some shelter for investors' money when share prices are falling, and performed in line with the benchmark when they are rising. The fund outperformed the broader UK stock market over the past year and it's done well over the longer term too. Our analysis puts this down to the managers' ability to select companies with bright futures ahead of them. We think this is a reasonable option for UK exposure but it has a higher annual management charge than our preferred funds in this sector.

Latest research updates

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In this newly enhanced fund update, Investment Analyst Dominic Rowles explains why we've added the Liontrust UK Growth Fund to the Wealth Shortlist of funds with long-term potential.

Legal & General UK Mid Cap Index: June 2020 fund update

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In this newly enhanced fund update, Investment Analyst Jonathon Curtis explains why we've added the Legal & General UK Mid Cap Index fund to the Wealth Shortlist of funds with long-term potential.

Fidelity Special Situations: June 2020 fund update

Fidelity Special Situations: June 2020 fund update

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In this newly enhanced fund update, Investment Analyst Dominic Rowles explains why we have added the Fidelity Special Situations Fund to the Wealth Shortlist of funds with long-term potential.

Legal & General UK Index: May 2020 fund update

Legal & General UK Index: May 2020 fund update

Mon 11 May 2020

In this newly enhanced fund update, Investment Analyst Dominic Rowles shares our analysis on the manager, process, culture, cost and performance of the Legal & General UK Index Fund.

AXA WF Framlington UK: April 2020 fund update

AXA WF Framlington UK: April 2020 fund update

Fri 01 May 2020

In this newly enhanced fund update, Investment Analyst Dominic Rowles shares our analysis on the manager, process, culture, cost and performance of the AXA WF Framlington UK Fund.

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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