Mark Dampier: Drill down for the best managers

The Analyst

I wonder whether, like me, you find yourself constantly battling against information overload? The internet in particular has brought a deluge of facts and figures and while some of it is valuable, much of it can be contradictory. I have found myself reading two intelligent, erudite and convincing arguments on totally opposite points of view in the same sitting.

At times many people struggle to see the wood for the trees. That's why I always try to remember that the best use of an investor's time is to seek out the best fund managers, rather than fretting over which market will perform the best. Over the long term the top managers should see you through.

With more than 2,000 funds available in the UK, you might think that even this approach wouldn't improve an investor's lot - the array of choice still appears bewildering. However, the majority of these are poorly managed and can quickly be discounted; I doubt there are more than a couple of hundred funds that are truly worthy of attention. Even amongst the good ones a few stand out as being really exceptional.

One of those is the Old Mutual UK Select Smaller Companies Fund, which is run by what is, in my opinion, one of the best investment teams in the country.

You would be forgiven for thinking that the last area you would want to invest in a recession is smaller companies. After all, they tend to be particularly sensitive to the economy and are known to be volatile, higher risk investments. Yet some smaller companies funds have been excellent over the last year, and I'm not surprised to see Old Mutual among them.

In fact, the nature of smaller companies in the UK has changed dramatically over the last 25 years or so. Where once the sector was dominated by engineering firms, particularly those based in the Midlands, now the sector is far more diverse and not all are domestically orientated. Some smaller companies are world leaders in their field and have plenty of overseas income - useful given sterling's current weakness.

What I like about the Old Mutual fund is that it has an extremely pragmatic approach, using a combination of individual stock research and analysis of the wider economy. It has been a successful performer for many years. In the early part of this decade a focus on the progress of the business cycle helped the managers deliver good returns. In the middle part, when pretty much everything was going up, it was more important to get stock picking decisions correct and here too they excelled.

The fund has shown that whatever the economy or stock market throws up, it has the capacity to deliver performance superior to its peers. Since its launch in January 2001 it is up by a remarkable 191 per cent compared to a rise of just 19 per cent for its sector average and 16 per cent for the UK stock market as a whole.

This is not to say, however, that the Old Mutual team get everything right. The lead fund manager, Daniel Nickols, will admit that the fund was a little left behind in March, April and May when the current rally began. At the time he was only just beginning to shift his portfolio from being relatively defensive to more aggressive, so while the fund did OK during the early stages of the rally it didn't capture the full gain.

The team continue to believe that the more economically sensitive parts of the market will continue to do well in the short term. They are mindful though that 2010 could be an extremely difficult time - especially after the general election - and their approach will have to remain flexible.

I like that Daniel Nickols and the Old Mutual team never rest on their laurels and are constantly re-evaluating their own views. Despite all this, smaller companies must still be considered a higher risk investment, so won't be everybody's cup of tea. If you're prepared to accept these risks, however, then I believe the Old Mutual UK Select Smaller Companies Fund should be on your buy list.

Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

yourmoney@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
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

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
    'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

    'Queer saint' who bankrolled artworld giants

    British culture owes a huge debt to Peter Watson, says Michael Prodger
    Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

    Pushkin Prizes brings countries together

    Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
    14 best kids' hoodies

    14 best kids' hoodies

    Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
    Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

    The acceptable face of the Emirates

    Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk