Looking for growth? Find a winning fund manager – and stick with him
INVESTORS looking for growth might need to find managers who identify companies with the potential to thrive, and then back their bets with conviction.
Such ‘best ideas’ funds often have fewer holdings than other funds, but also rarely resemble any index or benchmark.
Ben Yearsley at fund broker Hargreaves Lansdown says high conviction managers include Anthony Cross and Julian Fosh of Liontrust Special Situations; Richard Buxton, who runs Schroder UK Alpha Plus; and Nigel Thomas, manager of Axa Framlington UK Select Opportunities.
Yearsley says: ‘You have to stick with this type of manager. There will be periods where their performance looks poor, but over the long term their convictions should pay off.’ James Anderson, who manages the £2.2billion Scottish Mortgage global growth investment trust, says: ‘It is much more important than it used to be to pick the winners and be invested in the right companies.’ He runs Scottish Mortgage as a concentrated portfolio, with about 80 companies from around the world. His focus is to back his chosen firms strongly. For example,
he feels that
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healthcare is one of the sectors where technology will soon be transformed and invests in companies such as Intuitive Surgical, which specialises in robotic surgery, and genetic sequencing specialist Illumina.
A concentrated or best ideas investment strategy is not for everyone. It is likely to be more volatile than a conventional fund and savers must commit for at least five years. But over time, if the manager picks right, it could produce better returns.
Alec Clark, 76, has invested with Scottish Mortgage for almost 20 years. He and his wife Helen, 70, reinvest their dividends, accelerating growth on the fund. In the past ten years, total returns have been almost 140 per cent. He says: ‘I like pretending the market is closed for further business so you just have to forget about all the shortterm movements and hold on to an investment for years.’ His returns have inspired Alec, who lives near Stirling, to take a similar long-term view in saving for his two grandchildren, Mhairi, 12, and Sean, 7. He and Helen contribute £25 a month into a savings plan for each grandchild, which buys shares in Scottish Mortgage.
Alec, who managed a building firm, says: ‘In the ten years we’ve been saving for Mhairi there have been more ups than downs.’