With Britain’s economic prospects looking grim, it’s no wonder UK-focused funds are cheap. In some cases that’s justified, but in others it looks like investors are getting carried away.
Take Standard Life Investments UK Smaller Companies Fund, run by Harry Nimmo. It has sold off by 5.8% in the last six months despite an excellent track record of rewarding investors. There is no doubt about it, says Investment Week, Harry Nimmo is a “small-cap maestro”. Over the past five years his fund has returned more than three times as much as the average UK Smaller Companies fund. Nimmo has managed 18.9%, 48.1% and 71% over the last one, three and five years respectively.
He disagrees with the traditional view that small firms are more risky. “I think large caps are actually more risky than small caps these days,” he told the FT. “Banks have been a total disaster, and if you look at mining stocks, some of these have been absolutely slammed. Of course, there are plenty of high-risk small caps as well, but we don’t invest in them.”
He concedes that “the aftermath of the banking crisis is still lurking in the shadows” and admits that “sovereign debt and national budget stress will continue to hold back Britain’s more domestically focused sectors, notably those dependent on government spending. But he’s confident that many UK firms, “particularly in the engineering, electrical and electronic sectors”, will be able to tap emerging-market growth. He likes stocks that derive their profits from internet services – ASOS, Paddy Power and Rightmove are the top three holdings.
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Standard Life UK Smaller Companies top ten holdings
| Name of holding | % of assets |
|---|---|
| ASOS | 5% |
| Paddy Power | 4.2% |
| Rightmove | 3.5% |
| Abcam | 3.2% |
| Telecom Plus | 3.2% |
| New Britain Palm Oil | 2.8% |
| Renishaw | 2.8% |
| 1st Quantum Minerals | 2.7% |
| Hargreaves Lansdown | 2.5% |
| Aveva | 2.3% |