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2021's overlooked fund outperformers

Our latest selection of promising small funds
2021's overlooked fund outperformers

Another year, another surge in assets for the UK’s biggest funds. In September 2020 we noted that Fundsmith Equity (GB00B4Q5X527) had more than £20bn in assets, with Scottish Mortgage Investment Trust (SMT) commanding a market capitalisation in excess of £14bn. A little over a year later, Terry Smith’s flagship fund now has more than £27bn in assets and Scottish Mortgage has swelled to more than £21bn.

Greater fund size does confer advantages, from economies of scale and potentially lower fees to greater clout with investee companies. But taking on substantial assets can also put a brake on performance for some portfolios. Many funds have enjoyed their best returns while they are still small and nimble, with a manager focused on producing the best returns rather than managing substantial assets.

With this in mind, we have again (see September 2020 and a year before that) sought to identify smaller funds with outstanding levels of risk-adjusted outperformance (also known as the information ratio). These funds could give portfolios an edge and lessen your reliance on bigger names.

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