Equity funds race ahead

Nic Cicutti on a popular sector

As the world's financial markets betray the first hints of nervousness after two years of almost uninterrupted growth, the problem of how to continue making gains suddenly assumes greater importance. With almost pounds 20bn in funds, the UK equity growth sector is by far the most popular for hundreds of thousands of investors.

Average returns for this sector have been respectable in the past 12 months. HSW, the statistics provider, calculatesthe average growth in the value of the 149 funds around since 1 December 1995 was 9 per cent. In the past two years, returns have averaged 30.9 per cent.

The figures show some remarkable variations, including the measly 1.6 per cent advance achieved by Eagle Star's Environmental Opportunities fund and the 0.4 per cent loss nursed by Exeter's Capital Growth unit trust.

But other funds have raced ahead, Baring's UK Growth trust achieving 17.4 per cent in the past 12 months, Lincoln National's 22.3 per cent and Johnson Fry Slater Growthshowing 46.2 per cent growth.

For investors, the most important aspect of any decision on where to place their money is not just a record over one or two years but a fund's long-term performance.

The unit trusts in the graph above have all achieved that longer-term performance, remaining consistently in the top 25 per of funds in the sector almost every year in the past seven. Some have done so even longer. But while the returns are all good, the management style can differ.

Richard Royds, managing director of Mercury Asset Management's unit trust operation, says his company's Recovery fund, which shows returns of 104 per cent in five years, is based on its managers' willingness to change tack if they believe the markets arechanging. "We changed our manager some months ago when Paul Harwood, head of our specialist unit, took it over," Mr Royds says. "The performance up to then had been very good but this gave us the opportunity to look again at where the fund was going."

Until Mr Harwood took over, the Recovery fund portfolio had been heavy on small to mid-market firms quoted on the London Stock Exchange. Since then, given market volatility, he has placed greater emphasis on FTSE 100 shares.

Fidelity's Special Situations Fund is another to have delivered consistent returns, with growth of 148.7 per cent placing it in fourth position over five years and first, with 293.9 per cent, over 10 years.

A Fidelity spokeswoman says: "The fund manager is Anthony Bolton. The way he selects his stocks is that almost any share may at some time represent a special situation. Generally, valuations will be attractive in relation to net assets or earnings potential, with additional factors involved which may have a positive influence on share price."

For example, the fund will look out for companies in recovery situations, new technology, or bids. Investors should beware that the fund's bias towards smaller and medium-sized companies can lead to short-term volatility relative to the benchmark.

Jim Campbell, who manages one of the smallest funds in the sector with barely pounds 2.5m, the Commercial Union PPT UK Growth Fund, has also remained in the top 30 over the past five years, delivering overall returns of 97.8 per cent. He says: "Because it is a smaller fund, it is possible to be much more aggressive. The risk is greater but so is the reward."

The Commercial Union fund will hold shares in about 50 companies, less than is usual. But Mr Campbell says: "I can concentrate on stocks I like. But the volatility of the market means more bottom-up stock selection."

Jeff Sanders, fund manager at Standard Life, also believes in careful stock selection for his UK Equity Growth fund, which has delivered returns of 148.5 per cent in the past seven years.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Finacial products from our partners
Property search

Scottish independence: How will kilt-edged stocks fare?

Scottish companies were caned when the separatists surged in the polls. Is this the future, asks Simon Read, and would they be any better together?

Two million first-time buyers are locked out

The drought in lending to people with low deposits has created legions of frustrated buyers, writes Emma Lunn

Leaving money to charity in your will could help reduce the tax bill for your loved ones

Next week has been designated "remember a charity in your will week", to put the focus squarely on the subject
Money is slipping through our fingers: the UK is falling behind other countries in the amount we put away

How to save money: UK is crashing down the European league table for putting money away

The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options

Energy firms found guilty of bad practice could have licences revoked under Labour government

Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator

A student's guide to financial survival: You don't have to drown in debt at university

Fresh from A-level delight, the moment does not have to be soured by students resigning themselves to thousands of pounds worth of debt in three years' time. Rob Griffin sees how to pass the university challenge

'Dismal' eurozone data sparks concerns

European Central Bank chief Mario Draghi is under pressure to launch promised stimulus before the EU slides further
Love but not marriage: property is one area where cohabiting couples are in danger of losing out

How couples can protect their financial interests when cohabiting

People who simply live together cannot assume they have the same rights to each other's assets as spouses or civil partners. Michelle McGagh sees how they can protect their financial interests
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Project manager - Web E-commerce

    £65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

    Robert Fisk on Syria air strikes

    ‘Peace President’ Obama had to take stronger action against Isis after beheadings
    Will Lindsay Lohan's West End debut be a turnaround moment for her career?

    Lindsay Lohan's West End debut

    Will this be a turnaround moment for her career?
    'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

    The follow-up to 'The Tiger Who Came to Tea'

    Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
    BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

    BBC Television Centre

    A nostalgic wander through the sets, studios and ghosts of programmes past
    Lonesome George: Custody battle in Galapagos over tortoise remains

    My George!

    Custody battle in Galapagos over tortoise remains
    10 best rucksacks for backpackers

    Pack up your troubles: 10 best rucksacks for backpackers

    Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world