And the winners of the UK Growth award are...
BEST LARGER FUND
1-year return: 5.1%
3-year return: 53.6%
CFP SDL UK Buffettology is a fifth-time winner in our awards, clinching the title of Best Larger UK Growth fund for the second year running, having been named the Best Smaller UK Growth fund for the previous three years. It has been a Money Observer Rated Fund since 2016.
It follows the methodology of Warren Buffett and has produced among the best returns in its peer group, while crucially taking a lower level of risk than many of its competitors. The fund has ballooned in size from £42 million in 2016 to £329 million a year ago and £872 million today.
Keith Ashworth-Lord, its manager since its inception in 2011, invests in companies with strong balance sheets and the ability to grow over the long term. His style is known as ‘business perspective investing’, which follows the Buffett principle of buying shares in good businesses for less than the business is intrinsically worth and ideally holding them forever.
When he finds an attractive investment he invests a meaningful amount in it. He concentrates the fund in relatively few companies (there are currently 32 portfolio holdings) that he feels he knows a lot about.
He “can’t think of a more suitable epithet for investment” than the mantra of the late Lee Kwan Yew, the nation-builder of Singapore, which was to “figure out what works, then do it”. He regards investment as a business venture, not a gamble. It is the companies not the stockmarket that make money for investors.
HIGHLY COMMENDED LARGER FUND
MI Chelverton UK Equity Growth is a newcomer to our awards, but has been a Rated Fund since 2018. Backing cash-generative smaller companies has given it the best three-year returns in the sector, which it has achieved with among the lowest levels of volatility.
Its focus on companies that are listed in the UK but fall outside the FTSE 100 index has seen it slip down the performance tables more recently amid Brexit-related headwinds, but its longer-term credentials are clear.
James Baker, its manager since inception in 2014, and Edward Booth, his assistant since 2016, look for companies with strong market positions that are expected to grow faster than the UK economy. They typically have a sustainable competitive advantage, such as a unique product or dominant market position.
These value seekers are going from strength to strength
BEST SMALLER FUND
1-year return: 9.0%
3-year return: 40.0%
Our awards criterion for smaller funds is that they should not be larger than £150 million, and Aberdeen Responsible UK Equity is a tiddler of a fund with just shy of £26 million in assets. It nevertheless packs a punch. It is a consistently strong performer, ranking in the first quartile of its peer group over one and three years. It also rates well on a risk-adjusted basis – limiting volatility and the level of risk it takes with investors’ capital to achieve its returns. As its name suggests, the fund has a keen focus on responsible investing, leading to an above-average Morningstar sustainability rating.
Run by the UK equity team at Aberdeen Standard Investments, it has no named managers, in line with many other funds in the former Aberdeen Asset Management stable. It is a relatively concentrated fund with just 40 holdings. The top 10 account for a third of assets.
The team invests 80% or more of the fund’s total net assets in UK equities, and considers environmental, social and governance (ESG) factors as well as choosing companies on the basis of their financial record, management and business prospects. Where it believes that practices relating to these criteria are lacking, it will encourage the company to adopt more responsible practices.
Funds like this one, that demonstrate good financial returns while being committed to promoting sustainability, can attract a growing following.
HIGHLY COMMENDED SMALLER FUND
MFM UK Primary Opportunities is the only fund dedicated to investing at the point a company is raising money – floating on the stockmarket for the first time or coming back to the market (known as primary placings). This could be for a variety of reasons – expansion, acquisition, research and development or working capital.
The natural policing of the market at a time of economic uncertainty means only better quality companies are successful in raising new money.
Lead manager Oliver Brown, of RC Brown Investment Management, points to primary placings – “very much our bread and butter” – typically being priced at discounts of 2-10% to the prevailing market price. Buying at a discount is one factor that has supercharged its investment returns into the first quartile over three years.
Showing how to profit from responsible practices