For most UK investors, diversification means turning to a global or even multi-asset fund, but diversification across sector and market cap is also important. "Managers with a mandate that allows them to go across the market-cap spectrum have greater flexibility in finding opportunities," says Andy Parsons, head of investment research at the Share Centre.
- Strong long-term performance
- Diverse portfolio
- Flexible investment mandate
- Experienced manager
- Recent returns not as strong
If you are looking for a truly diversified one-stop multi-cap UK fund, then AXA Framlington UK Select Opportunities is worth a look. This fund usually has around one-third of the portfolio in large companies from the FTSE 100 with a focus on medium-sized and smaller companies. But over recent months it has put more in larger companies, with these now accounting for nearly 54 per cent of assets.
AXA Framlington UK Select Opportunities typically holds around 80 shares and has no specific stock or sector constraints, although exposure to one company is unlikely to exceed 3 per cent of the fund. While the FTSE All-Share index is used as a point of reference the portfolio does not have to reflect its weightings, allowing the manager to select his best investment ideas. The fund's aim is to achieve capital growth via companies he thinks will offer above-average returns.
This investment flexibility has served this fund well in terms of performance. The fund is among the top few performers and well within the first quartile of UK All Companies funds over three and five years, and it is well ahead of the FTSE All Share over those periods. Since launch, the fund has returned 504.63 per cent against 291.26 per cent for the All Share. Despite this, it still has a below-average total expense ratio of 1.55 per cent.
IC TIP RATING | |
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Tip style: | Growth |
Risk rating: | Medium |
Timescale: | Long term |
As well as the flexible mandate, a driver of the fund's returns is its experienced manager, Nigel Thomas. "Mr Thomas has been at the helm of the fund since September 2002 and brings his vast experience of stockpicking to the table," says Mr Parsons. "For this fund stocks are selected in several ways. Mr Thomas is forward looking in his approach and seeks a mixture of opportunities from circumstances such as recovery, growth, value, consolidation - or even a complete management change - the introduction of new products, or technological change. Also, the manager is a firm believer in meeting all prospective companies, as this assists him in determining whether or not management has the ability to deliver business plans. And he has clearly proven over varying time periods and tough economic challenges that he has an ability to identify some of the very best investment opportunities."
Valuation is a central consideration and Mr Thomas continuously monitors a company's price/ earnings (PE) ratio against assessments of reasonable value, to ensure that he does not overpay for potential growth.
The fund is not so high up the rankings over one year, but is still among the top 25 per cent of performers in its sector. In any case, if you hold a fund that includes smaller companies you should have a long-term investment horizon of at least five years. BUY.
AXA FRAMLINGTON UK SELECT OPPORTUNITIES Acc (GB0003501581) | |||
PRICE | 2,258p | MEAN RETURN | 15.18% |
IMA SECTOR | UK All Companies | SHARPE RATIO | 1.03 |
FUND TYPE | Unit trust | 1-YEAR PERFORMANCE | 22.64% |
FUND SIZE | £3.2bn | 3-YEAR PERFORMANCE | 51.13% |
No OF HOLDINGS | 74* | 5-YEAR PERFORMANCE | 33.96% |
SET UP DATE | 31-Jan-69 | TOTAL EXPENSE RATIO | 1.55% |
MANAGER START DATE | 09-Sep-02 | YIELD | 0.15% |
MINIMUM INVESTMENT | £1,000 | MORE DETAILS | www.axa-im.co.uk |
STANDARD DEVIATION | 14.60% |
Source: Morningstar, *AXA Framlington. Performance data as at 12 September 2012.
Top ten holdings as at 31 August 2012 (%)
Holding | % |
Imagination Technologies Group Plc | 4 |
Weir Group | 3.7 |
GlaxoSmithKline | 3.6 |
Vodafone Group | 3.4 |
Diageo | 3.3 |
Royal Dutch Shell B | 3 |
BG Group | 2.9 |
ITV | 2.9 |
Experian | 2.9 |
Next | 2.8 |
Sector breakdown as at 31 August 2012 (%)
Energy | 20.6 |
Industrial Metals | 16.9 |
Consumer Goods | 11.8 |
Consumer Services | 11.4 |
Media | 9.9 |
Other | 29.4 |