Zero To Hero

The difficult market conditions of the last 12 months ought to have played into the hands of the manager, who has previously performed well in such conditions. However, this time it is different, the fund is now a serious laggard in its peer group. In recent times a number of new launches in the cautious managed sector have put pressure on some old favourites like this. Time to look elsewhere.

Jupiter Merlin Income Portfolio

This is one of their wide range of fund-of-funds and is incredibly popular with investors in the current climate. It aims for a mix of capital growth and growing income in line with inflation. The experienced team has worked together since 1999, a distinct advantage. Generally in the region of 12-15 funds are held, comprising of several UK income funds, with a maximum of 60% in equity funds, the remainder invested in fixed interest funds and cash.

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JPM Cautious Total Return

Launched in July 2005, this is designed to beat the returns available from UK short-term interest rates. Like a number of other JPM funds, this one is co-managed and the level of equity exposure is restricted to 40%, although at present it stands nearer 20%. Currently the fund is structured with a strong emphasis on cash and money market funds, with the majority of the remainder in fixed interest stocks. This is a fund for more depressed markets.

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With hindsight the downturn in performance appears to have broadly coincided with the previously high profile and well-regarded manager deciding to leave earlier in the year. Rather than wait for the new manager to establish himself, look elsewhere, especially as there are some excellent alternatives.

We suggest that rather than simply switching your money into another Smaller Companies fund, you consider these funds in the UK Equity sector:

Standard Life UK Equity Growth

Of their range of strongly performing UK equity funds, the experienced Karen Robertson manages two, this and UK Equity High Income. Having the scope to call upon one of the largest UK research teams is a significant advantage, used to good effect since taking over its management in May 2004. Her disciplined investment process is apparent, a feature behind delivering superior returns. Generally she favours larger companies, with a portfolio of around 70 companies.

Download fund factsheet (90k, PDF) - Invest Now

Schroder UK Alpha Plus

Richard Buxton is Head of their UK Specialist team, ensuring a capable individual in charge of this equity fund. This concentrated fund, focussing on medium and larger UK companies, typically has around 30 or so holdings. While it generally has a high top-ten concentration of around 40%, performance tends to be consistently strong and with scope to hold up to 20% in cash or gilts, it has greater flexibility than many similar funds.

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This previous market leading fund has been gradually falling out-of-bed in performance terms. Although the manager has not changed, clearly his process for selecting shares is not what it was. The underperformance has been too protracted, no longer should investors be patient.

Invesco Perpetual Income

This is one of two very high profile equity funds managed by Neil Woodford. While amongst the largest retail funds in the UK market, this has not suffered from any related downturn in performance. This decisive manager, fully prepared to back his own convictions, generally favours sectors which are traditionally classified as "defensive" and prefers to hold onto stocks for longer than average.

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Neptune Income

Dating back to December 2002, this equity fund is managed by Neptune's founder Robin Geffen. His unusual approach is to have 33 equally weighted stocks, rather than having a higher number of holdings of greatly differing sizes. These are chosen from the largest 400 UK companies, although there is scope to invest up to 20% in overseas stocks if he feels there are insufficient opportunities in the UK. 11 stocks are chosen from each of three categories: ones with a 5 year dividend growthe record, ones classed as recovery positions and lastly ones which are tactical plays over the short term of up to 6 months.

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This equity income fund performed well during the early stages of the recovery which shares enjoyed in 2003. However, of late this is a mediocre performer in a sector where competition is possibly at its highest. So retaining this when there are funds managed by individuals with decades of experience makes little sense. Use one of those proven managers instead.

Invesco Perpetual Income

This is one of two very high profile equity funds managed by Neil Woodford. While amongst the largest retail funds in the UK market, this has not suffered from any related downturn in performance. This decisive manager, fully prepared to back his own convictions, generally favours sectors which are traditionally classified as "defensive" and prefers to hold onto stocks for longer than average.

Download fund factsheet (70k, PDF) - Invest Now

Neptune Income

Dating back to December 2002, this equity fund is managed by Neptune's founder Robin Geffen. His unusual approach is to have 33 equally weighted stocks, rather than having a higher number of holdings of greatly differing sizes. These are chosen from the largest 400 UK companies, although there is scope to invest up to 20% in overseas stocks if he feels there are insufficient opportunities in the UK. 11 stocks are chosen from each of three categories: ones with a 5 year dividend growthe record, ones classed as recovery positions and lastly ones which are tactical plays over the short term of up to 6 months.

Download fund factsheet (320k, PDF) - Invest Now

After a very strong start 6 years ago, this no longer is the buy it previously was. Despite no manager changes, alterations have been made to the way the fund is run, resulting in fewer holdings being maintained. From an investor's point of view it means if the manager gets it right it is great, however, if not then the fund suffers more. With many strong competitor funds available, use one of them instead.

Standard Life UK Equity Growth

Of their range of strongly performing UK equity funds, the experienced Karen Robertson manages two, this and UK Equity High Income. Having the scope to call upon one of the largest UK research teams is a significant advantage, used to good effect since taking over its management in May 2004. Her disciplined investment process is apparent, a feature behind delivering superior returns. Generally she favours larger companies, with a portfolio of around 70 companies.

Download fund factsheet (90k, PDF) - Invest Now

Schroder UK Alpha Plus

Richard Buxton is Head of their UK Specialist team, ensuring a capable individual in charge of this equity fund. This concentrated fund, focussing on medium and larger UK companies, typically has around 30 or so holdings. While it generally has a high top-ten concentration of around 40%, performance tends to be consistently strong and with scope to hold up to 20% in cash or gilts, it has greater flexibility than many similar funds.

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Substantial exposure to the smallest of companies continues to cause major problems. No longer rated by the independent research firm S&P since last Autumn, this has continued to be a disappointment. Several outstanding years have been folllowed by some equally poor years, which is much too erratic for most investors. Hard earned money can be reinvested in a better way.

Standard Life UK Equity Growth

Of their range of strongly performing UK equity funds, the experienced Karen Robertson manages two, this and UK Equity High Income. Having the scope to call upon one of the largest UK research teams is a significant advantage, used to good effect since taking over its management in May 2004. Her disciplined investment process is apparent, a feature behind delivering superior returns. Generally she favours larger companies, with a portfolio of around 70 companies.

Download fund factsheet (90k, PDF) - Invest Now

Schroder UK Alpha Plus

Richard Buxton is Head of their UK Specialist team, ensuring a capable individual in charge of this equity fund. This concentrated fund, focussing on medium and larger UK companies, typically has around 30 or so holdings. While it generally has a high top-ten concentration of around 40%, performance tends to be consistently strong and with scope to hold up to 20% in cash or gilts, it has greater flexibility than many similar funds.

Download fund factsheet (150k, PDF) - Invest Now

This sort of very specialist fund will never simply tick over, always likely to be near the top or the bottom when considered against other Japanese funds. However, as this is practically the most volatile fund in its sector, the possible benefits do not stack up. There are a number of other Japanese funds which would be favoured over this one.

Jupiter Japan Income

Launched in September 2005, this seeks a mix of capital growth and income. Generally in the region of 50 companies are held aiming for a mix of income and capital growth. Usually around one-third of the fund is invested in the top ten holdings. The fund manager favours companies generating sufficient excess cash to pay dividends and those where there is a willingness to increase dividends.

We have only featured one fund as we feel that many clients should consider a more global fund, to spread their risk. Of course, our Investment Shortlist carries further options.

Download fund factsheet (130k, PDF) - Invest Now

When the manager's preferred area of investing is in favour it is fine, however, if medium and smaller growth companies are out-of-favour then it turns ugly. The continued dogmatic approach of the manager ought to be more flexible. This is not a core holding for most investors, much too erratic. Look elsewhere.

Jupiter Japan Income

Launched in September 2005, this seeks a mix of capital growth and income. Generally in the region of 50 companies are held aiming for a mix of income and capital growth. Usually around one-third of the fund is invested in the top ten holdings. The fund manager favours companies generating sufficient excess cash to pay dividends and those where there is a willingness to increase dividends.

Download fund factsheet (130k, PDF) - Invest Now

We have only featured one fund as we feel that many clients should consider a more global fund, to spread their risk. Of course, our Investment Shortlist carries further options.

This internationally invested fund generally prospered after the market lows in March 2003. More recently however it has delivered uninspiring results and currently looks like an also-ran when compared to its peers. With so many good global funds available, the likelihood is that this will attract very little new money into it, in fact money will probably generally be leaving.

Newton Global Higher Income

Launched in November 2005, this equity fund aims to exploit the opportunities from the ever increasing range of companies with an attractive yield. Although the fund manager James Harries is quite experienced, this is his first fund with an income mandate, however, he has an extensive team of research analysts to call upon. A meaningful level of income ensures this is a valuable alternative to complement UK income funds.

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T. Bailey Growth

As a fund of funds boutique group, T. Bailey have a vested interest to perform, with the managers having invested in their own fund. Generally around 40% will be invested in the UK, the remainder overseas. They are prepared to invest early in the life of a new fund provided there is a compelling story behind it (which has worked well on a number of occasions) not something their peers will always do.

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Opting instead for a fund within the actively managed sector is worth considering as an alternative, for example the New Star Active Portfolio:

New Star Active Portfolio

The two fund managers have worked together since 2002, refining a successful process for the range of fund-of-funds they manage. They adopt a highly pro-active approach when managing this equity based fund, which usually comprises of around 20 funds. As some of the more forward thinking fund-of-fund managers, they will often invest in funds/areas which are overlooked by many of their peers.

Download fund factsheet (1MB, PDF) - Invest Now