portfolios have flourished over the past 12 months but have provided high volatility
UK-focused funds launched by investment houses over the past 13 months have largely established themselves in the top performance decile of the UK All-Companies sector since their respective launch dates.
A lot of hype has surrounded the launch of these funds, which typically hold between 25 and 35 stocks, as they offer potentially higher returns with greater levels of tracking error, high turnover and increased risk on the downside.
Offer to bid figures from Standard & Poor's show the BWD Rensburg UK Aggressive fund is ranked first out of 298 in the All Companies sector since its launch at the end of September 2001 to 28 January 2002.
Gartmore UK Focus is similarly ranked first of 284 funds in the period over 1 February 2001 to 28 January and Invesco Perpetual UK Aggressive is second out of 293 funds in the period 23 July to 28 January. R&SA UK Prime is ranked 15 of 228 funds over the period 1 May 2001 to 28 January.
Returns on the funds in those very different periods have beaten the sector average by between the 17.37% for BWD and 7.12% for R&SA. It has to be remembered, however, that the BWD fund was launched after the 11 September terrorist attacks which forced markets down.
One UK-focused fund that has disappointed is Friends Provident UK Focus, which is down 25.38% since launch.
The £39m Gartmore UK Focus fund, which holds between 25 and 40 stocks depending on the dual managers' level of conviction, has traded with a tracking error ranging between 5%-10% since launch compared with between 1%-4% for more traditional UK fund offerings.
Similar to many of its focused fund peers, it has seen greater volatility in its month-on-month discrete returns since its launch on 1 February last year than the UK All Companies sector, according to Standard & Poor's. It has, however, shown occasions where the bets of co-managers Simon King and Ashley Willing have reduced NAV falls compared with its peers.
The largest negative return posted by the funds came between 3 September and 1 October, a period overhung by events in the US.
During that time, the fund made offer to bid returns of -16.58% compared with the UK All Companies sector average return of -15.71%.
The Invesco Perpetual fund fell by 27.6%, the highest of any focus fund, with R&SA UK Prime and Friends Provident UK Focus returning -14.32% and -13.96% respectively.
The Gartmore UK Focus fund outperformed the sector average six of the 12 months of its lifetime but significantly beat the sector average on the three months in which the sector posted positive returns.
The BWD Rensburg Aggressive Growth fund has outperformed in three out of the four months it has been trading, Invesco Perpetual in four of seven, R&SA in six of nine and Friends Provident in only one in seven months.
Speaking at the Investment Showcase 2002 last week, a curtain-raiser for the series of roadshows taking place around the country, King said he and Willing had moved Gartmore UK Focus closer to the FTSE All-Share index and had increased the number of holdings to just under 40.
One of the features that marks out focused funds is the high rate of portfolio turnover. Last week Investment Week revealed that annualised turnover on the R&SA UK Prime fund was in the region of 600%.
The Gartmore fund trades at a similarly high level, balancing longer term bets with short-term trading, although Gartmore would not reveal the full extent of turnover.
Morley has also launched a UK focused fund on 5 November, the Morley UK Focus fund managed by David Liss, however at the time Investment Week went to press it had not racked up a three month track record.
'Failure to pay attention can result in enforcement'
200,000 LISAs opened so far
From June 2019
11 years since launch of three Chartered titles
Hired 200 extra operational staff