The UK All Companies sector is defined as funds investing at least 80% of their assets in UK equities that have a primary objective of achieving capital growth.
It encompasses a wide range of objectives, from index funds and trackers through large-cap growth, ethical, special situations, mid-cap and a host of esoteric specialists and ‘bee-in-the-bonnet’ stuff.
According to Morningstar, there are 272 funds in the sector, of which 245 have been running for at least five years. As expected, there has been a fairly wide variation in five-year annual compound returns.
The top performer has returned an average of 21.5% per annum, while the bottom one delivered 2.3%, which is less than a deposit at Bank of England rates. The average was 10.5% per annum, which is pretty healthy but, as shown, hides a multitude of sins.
The average fund beat the FTSE All-Share at 9% per annum, which also means that 154 out of 245 funds beat the All-Share and, needless to say, the trackers. Any one of the top 50 would have returned upwards of 12.5% per annum.
As the sector covers such a wide range of managers trying to do the same thing in many different ways, it is not possible to generalise. However, the top performer over five years was a mid-cap fund and a good proportion of others in the top 10 have serious Mid-250 exposure. It is also fair to say that, due to the relative uncertainty since 2011, the ‘steady eddies’ are well to the fore.
Growth as a style has been in the ascendancy for the whole of the period but there are signs this is changing. Company profit growth is a rare commodity and has been for some time. If it were not for the fall in value of sterling since Brexit, it is likely the large exporters would be struggling. Should the new trend continue over the next five years, either there will be a great deal of rotation in portfolios or the batting order will have changed appreciably.
Quality growth stocks are now more than fully valued and some commentators have started to muse as to whether a switch into value and cyclicals is overdue.
It will be interesting to see which managers have moved and which are still to do so – or disagree.
