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

Life and Style
Powdered colors are displayed for sale at a market ahead of the Holi festival in Bhopal, India
techHere's what you need to know about the riotous occasion
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
Finacial products from our partners
Property search
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: Evening Administrator

    £8 per hour: Recruitment Genius: This Pension Specialist was established early...

    Guru Careers: Executive Assistant / PA

    £30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

    Paul Scholes column

    I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable