Smaller companies and recovery stocks were highly featured in wealth managers' best performing funds of the year, much to the chagrin of those continuing to back defensive names.
A mid-cap fund, a small-cap fund and two special situations mandates were chosen by wealth managers as their best performers, at a time when investors have been cautious about moving down the cap scale and embracing the higher volatility in these names.
Only one bond fund featured in the list, despite the success seen in the asset class and one absolute return fund.
Most interestingly, is the appearance of the Henderson European Special Situations fund. It has outperformed when most asset allocators have been underweight - or zero-weighted - to the region.
Peter Lowman (pictured), CIO, Investment Quorum
Franklin UK Mid Cap fund
Manager: Paul Spencer
Year-to-date return: 26.04%*
"This year has been very rewarding for those investors that had had exposure to UK mid caps. By the end of November the FTSE 250 index was up around 19.0% for the year, outperforming its larger brethren by a considerable margin.
"At Investment Quorum we have owned the Franklin Templeton UK Mid Cap fund, managed by Paul Spencer. This fund is broadly managed with a bottom- up, stock picking approach, alongside a top-down outlook on the economy. There is no deliberate growth or value style bias and the manager is willing to take a contrarian view when market mispricing creates outstanding investment opportunities. Paul tends to run his portfolio holding a fairly tight list of stocks, normally, less than 40.
"His stock picks are extremely creditable taking into account business, balance sheet, management and valuation risk. The funds track record over all time frames has been very rewarding for those investors seeking exposure to this asset class."
Guy Foster, strategist, Brewin Dolphin
PIMCO UK Select Income Bond fund
Manager: Mike Amey
Year-to-date return: N/A
"As far as 2012 is concerned, all ships have risen on the liquidity tide. Finding standout performers is more about extra credit for low volatility than the primary objective of positive returns. On this basis, one of our most satisfying trades has been PIMCO UK Select Income Bond, which provided a positive return every month this year, averaging 1.5% per month.
"The fund has been a great way of playing retail and commercial MBS, producing high yield magnitude returns with a fraction of the credit risk."
Ben Seager-Scott, senior research analyst, Bestinvest
Liontrust Special Situations fund
Managers: Anthony Cross and Julian Fosh
Year-to-date return: 23.5%*
"A fund that I think has had strong performance this year is the Liontrust Special Situations fund. Cross and Fosh continue to demonstrate exceptional stock picking skills which has enabled them to generate strong returns even as markets have tended to range-trade sideways."
Gavin Haynes, managing director, Whitechurch Securities
Henderson European Special Situations.
Manager: Richard Pease
Year-to-date return: 20.23%*
"It has not been strongest performer in our portfolios, but the Henderson European Special Situations has been the most pleasing. Twelve months ago while many of our peers were taking a zero weighting in Europe based on the macro environment, we held a meaningful position in European equities across growth portfolios.
"Our view being that for fund managers with stock picking mandates, such as Richard Pease, had been "tarred with the same brush" and suffered indiscriminate selling, purely for being listed in Europe. The market looked oversold - in simple valuation terms US equity had become approximately 50% more expensive than European equity. With the stock picking prowess of Richard Pease this proved to be a good contrarian play and provided attractive growth, whilst outperforming benchmark and peer group."
Jonathon Lau, head of research, Brooks Macdonald
Newton Asian Income
Manager: Jason Pidcock
Year-to-date return: 20.95%*
"This has been a top quartile performer, relative to its sector. We chose this fund for the combination of our preference for income stocks with strong balance sheets, which, in this case, has been helped by emerging market growth."
Mike Deverill, investment manager for Equilibrium Asset Management
Odey UK Absolute Return fund
Managers: James Hanbury and Jamie Grimston
Year-to-date return: 34.12%*
"The Odey UK Absolute Return fund has done really well for us, whether markets have been rising or falling. It is not really what we call an ‘absolute return' fund but more a high risk fund that can go long or short of the market. We will continue to hold this into 2013."
Ben Yearsley, head of investment research, Charles Stanley
Cazenove UK Smaller Companies
Manager: Paul Marriage
Year-to-date return: 34.35%*
"It has been surprising how strong the smaller companies sector has been - there are lots of these funds in the top best performing funds of the year. I am not sure many people would have predicted that at the beginning of the year. Out of these we have held the Cazenove UK Smaller Companies fund."
*Data is to 11 November 2012, according to Morningstar.
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