Most funds that pursue a UK growth investment strategy tend to prioritise companies that are delivering high and accelerating revenue growth. This may mean that, on conventional metrics, the companies can look quite expensive relative to the rest of the market.
But fund managers reason that this is worth it for the stronger growth they produce. Companies of this type may be newer, smaller and their share prices will tend to perform better in a rising market, but may fall more than the market when sentiment is weak.
The danger with a growth strategy is that a company does not achieve its targets and is left looking expensive relative to the market. To avoid this trap, growth investors tend to look for 'growth at a reasonable price', which incorporates valuation discipline into their stock selection.
Growth managers may prioritise different types of company when investing. For example, some may seek out emerging industries such as technology or alternative energy. Others may look for high-quality companies that can grow their earnings in all types of market environment. Some may look for 'special situations', which can grow significantly from their current position.
Our 18 Rated Funds in the UK growth asset group are divided between core and adventurous choices. The five core funds tend to invest in high-quality companies with defensive characteristics. Most of the adventurous selections favour small and medium-sized companies and also have a good track record of capitalising on mispriced investment opportunities.