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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
31 May 2019

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. Uncertainty caused by Brexit and political turmoil means many people are cautious in their outlook.

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 50.

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 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.

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.

Our favourite funds in this sector

First-class performance potential and low management charges

View the Wealth 50

The UK stock market rose 3.1% in the 12 months to the end of April but was held back by concerns over Brexit negotiations and other political uncertainty.

The shares of large UK companies made money over the past year, while shares in medium-sized and smaller businesses lost money. Bigger businesses have tended to hold up better in times of uncertainty. Their scale means they can sell their products and services overseas and they aren’t as reliant on the UK economy as some of their smaller peers. This benefited funds with more invested in larger firms, although past performance isn’t a guide to the future.

Annual percentage growth
Apr 13 -
Apr 14
Apr 14 -
Apr 15
Apr 15 -
Apr 16
Apr 16 -
Apr 17
Apr 17 -
Apr 18
FTSE 100 6.4% -6.8% 20.0% 8.5% 3.1%
FTSE 250 13.2% -1.4% 18.9% 6.5% -1.4%
FTSE Small Cap 3.8% 3.8% 22.3% 6.1% -5.3%

Past performance is not a guide to future returns. Source: Lipper IM to 30/04/2019.

Technology companies were some of the best performing across the UK stock market over the past year. Investors also favoured companies in the health care and mining sectors. But telecoms and financials companies performed poorly.

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.

Five year performance

  • IA UK All-Companies sector

    +34.8%

  • FTSE All Share

    +35.2%

Source: Lipper IM to 30/04/2019. Please remember past performance is not a guide to future returns.

Our favourite funds in the sector

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 30 April 2019. Remember all investments can fall as well as rise in value so you could get back less than you invest. Past performance isn’t a guide to the future.

To view a full list of our favourite funds within the sector, visit the Wealth 50. 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.

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 his 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 evermore 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.

Tom Dobell looks for companies that have fallen out of favour with investors but where he thinks there is scope for a change in fortunes. He invests in companies of all sizes, including higher-risk smaller ones.

The fund hasn’t done as well as the broader UK stock market over the past few years. Periods of underperformance should be expected with recovery-style investing because companies going through change can stay out of favour for some time. But we have faith in the manager to identify those with good prospects over the long run. We also remain encouraged the manager hasn’t strayed from his tried-and-tested investment approach. This fund could be a good way to diversify a portfolio invested for growth.

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 31 companies. This, combined with investments in smaller companies, adds risk.

The manager's found lots of opportunities in the industrials sector and his fund's focused towards this area. Recent investments include global flooring specialist James Halstead. He's invested in the company for a number of years through other Unicorn funds so knows it, and its management team, well. The manager's got a good track record and we think his fund could 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 640 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 more than a decade 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. His 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 the Wealth 50 list of our favourite 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 Information Document).

Latest research updates

Franklin UK Managers' Focus - a tough year

Franklin UK Managers' Focus - a tough year

Wed 17 July 2019

To beat the UK stock market, you've got to do something different. This fund's run by five experienced managers, each with different strengths and areas of focus. In this update, we look at how the fund's performed and how it's invested.

Standard Life UK Equity Unconstrained - 'great companies aren't always the best investments'

Standard Life UK Equity Unconstrained - 'great companies aren't always the best investments'

Thu 27 June 2019

Wesley McCoy invests in companies many other investors overlook. His fund's performance has struggled in recent years but he remains positive. Find out why in this update.

Majedie UK Equity - a different way to invest in the UK

Majedie UK Equity - a different way to invest in the UK

Mon 24 June 2019

This fund is run by three managers, each with their own strengths, styles and areas of focus. In this update, we find out where they've found opportunities.

Merian UK Equity and Merian UK Alpha - fund merger

Merian UK Equity and Merian UK Alpha - fund merger

Wed 29 May 2019

Merian has announced plans to merge its UK Equity Fund into the UK Alpha Fund.

River & Mercantile UK Dynamic Equity - searching for diamonds in the rough

River & Mercantile UK Dynamic Equity - searching for diamonds in the rough

Wed 15 May 2019

William Lough took control of this fund when Philip Rodrigs left the company in February 2018. In this update, we look at how the new manager is getting on and where he's invested the 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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