Peps: Best and worst

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The Independent Online
S&P, one of the UK's biggest personal equity plan providers, stayed with an investment philosophy on both its special-situations and its UK smaller companies growth PEPs, which had a catastrophic effect over five years, writes Caroline Merrell.

At the end of the 1980s the UK smaller companies growth PEP invested in companies that had a market capitalisation of under pounds 20m. Firms of this size were hit severely by the recession. S&P made the mistake of sticking to this strategy until 1992, because it believed that recovery was just around the corner.

Alistair Fraser, marketing manager, said: 'We cannot defend where we have been. We have been taught a lesson.'

Two years ago the investment manager decided to completely restructure the fund. The revamped trust will now invest in companies that have a market capitalisation of up to pounds 300m, with the bulk invested in companies at the pounds 50m mark.

The change in investment philosophy has started to feed through to the performance of the fund. In the smaller-companies unit trust sector, it has clawed its way back from second bottom over five years to 34th out of 68 over one year, 16th over six months and 13th over three months.

Mr Fraser said: 'At the same time as the strategic review we have also moved into more general manufacturing companies.'

Thornton's UK smaller- companies fund benefited from being invested in companies with a higher capitalisation than S&P's fund throughout the recession.

Andrew Impey, UK fund manager, said: 'The average size of the companies we invest in is about pounds 60m.' Most of the good performance of this fund has been in the past year.

Morgan Grenfell's fund is invested in companies all over Europe. Julia Eynon, marketing manger, puts its performance down to its bottom-up approach.

It has a diverse investment strategy, holding shares in countries as far afield as Hungary and Finland.

The fund has a large team of analysts working on it and its managers make 300 company visits a year.

----------------------------------------------------------------- PEP QUALIFYING UNIT TRUSTS ----------------------------------------------------------------- The best pounds 1 Morgan Grenfell European . . . . . . . . . . . . . . .8,284.61 2 Prov Capitol European . . . . . . . . . . . . . . . . 8,248.07 3 Perpetual High Income . . . . . . . . . . . . . . . . 8,007.88 4 Pembroke . . . . . . . . . . . . . . . . . . . . . . .7,911.61 5 Thornton UK Smaller Co's . . . . . . . . . . . . . . .7,897.85 The worst 298 ManuLife UK Smaller Co's . . . . . . . . . . . . . . 3,348.84 299 S&P UK Smaller Co Growth . . . . . . . . . . . . . . 3,252.60 300 Equitable Special Situations . . . . . . . . . . . . 3,236.60 301 Arkwright Recovery . . . . . . . . . . . . . . . . . 3,136.66 302 S&P Special Situations . . . . . . . . . . . . . . . 3,134.36 Table shows the value on 1 March 1994 of a pounds 3,000 lump sum invested five years earlier. Source: Micropal -----------------------------------------------------------------

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