Joe McGrath rounds up this year’s winners in the What Investment Unit Trust Awards.

Spotting a fund worth adding to your portfolio can be a long and arduous process, especially in the current climate.
That’s why the results of this year’s What Investment Unit Trust awards have been eagerly anticipated by investors and the fund management industry alike as volatile markets have given the best managers a real chance to shine.
To make the shortlist (with the exception of the newcomer and editor’s awards), funds need to have shown a strong record over the past year and have shown a strong record over the past five years too. Added to this, a fund’s consistency during this time will also be graded along with the level of inflows that have come into the fund.
Finally, of those that have made the shortlist, the winner has been decided by considering whether the fund’s strategy as disclosed in the prospectus has been executed as stated.

Unlike some awards in the investment industry, the What Investment Unit Trust Awards aim to highlight excellence in those categories that are of most interest to investors.

You will note, then, that there is not an award for every single IMA category in the retail sphere, and this is quite deliberate. While it would be far easier for us to make a judgement in each category, it would result in a number of undeserving prizes being awarded. Therefore, we have limited our categories to the ten most important categories from a private investor’s perspective.

Judging criteria
Specialist category awards have been judged based on five metrics:

  • Performance of the fund over one year
  • Cumulative performance of the fund over five years
  • Inflows and outflows in/out of the fund over the past year
  • Consistency of the fund over five years on an annualised basis
  • Fund manager’s adherence to the criteria set out in the prospectus.


The Best Fund Manager award was decided after our analysts considered the consistency of the fund over the past five years, the management style of the manager over the past 12 months and the overall performance of the fund set against the economic indicators of the past year.

Best Fund Management Group was awarded by looking at the top 100 funds over the past year by performance, with the shortlist being drawn up from those companies with the most funds in that group. The panel then decided based on the strategy and performance of each fund set against its respective peer group in the Investment Management Association sectors.

The Editor’s Choice Award is a subjective award made from all of the ‘best’ funds that have been awarded as What Investment ‘thumbs up’ over all 24 fund surveys in the past year.

Best Fund Manager
Graham French, M&G Global Basics
M&G’s Graham French wins this year’s award, having successfully navigated a choppy 12 months in global markets.
French has managed the M&G Global Basics fund for more than ten years, making consistent returns in all economic environments and steering the fund to be the best in its sector over the past decade.

As at the end of April 2011, a £1,000 investment in the fund would have grown to an astonishing £3,379 over ten years, beating 87 other funds in the IMA sector.

Richard Miles, director of corporate communications at M&G, said the figures have been the result of French pursuing a strategy of investing in companies that are the building blocks of the world’s economy.

He explained, ‘He was early to spot that it is possible for investors to tap into the superior economic growth of re-emerging Asia through companies listed in the West. Underpinning his approach has been a strategy that today seems obvious but five years ago was not so. In short, investors needed to focus on international businesses supported by powerful long-term growth drivers; and to avoid companies ‘over here’ – those listed in developed markets – that were manufacturing goods that were also being produced in China, India and further afield.’

French believes that the cost advantages of the latter group have undermined the business models of the Western manufacturers and he was also among the first investors to recognise the investment attractions of companies in the West that manufacture goods or provide services that are much in demand in developing markets.

Companies such as PZ Cussons, known in the UK for soap production; in Nigeria it has a dominant position in the sale of aftershave. Over the past year, fund performance has been supported by exposure to a range of companies, from miners to restaurant chains, which are proving to be beneficiaries of these long-term dynamics.

Best Fund Manager Shortlist
Evy Hambro: BlackRock Gold & General
Paul Spencer: Rensburg UK Mid Cap Growth
Adam Cordery: Schroder Monthly High Income
Ian Stewart: Newton Real Return

BEST UK FIXED INCOME
Baillie Gifford High Yield Bond
In a highly competitive category that included all investment-grade bond funds as well as strategic and high-yield funds, Baillie Gifford had two funds making the shortlist.

In the end, though, the high-yield bond fund’s score on the two cumulative metrics, together with an excellent consistency score, put it ahead of the pack even before its gradings on strategy and inflows.

However, the fund’s clearly set-out strategy of lending to companies that can survive tough economic cycles and yet prosper in growth periods has delivered particularly over the past year.

Robert Baltzer, manager of the fund, said that by investing in strong companies he has been able to hold his nerve even in the very difficult markets.

He added, ‘As a firm, we have more than 100 years of investment experience. Our approach to investment has continually evolved but the tenets of our philosophy are now deeply ingrained.

‘We focus our efforts on knowing a relatively small number of companies very well. We avoid trading more frequently than is necessary but we remain alert to the opportunities that turbulent markets can create.’

Baltzer admits the team has made its share of mistakes, but that it learns from them and that has been the key to the success.

He continued, ‘All of these elements have combined over the past few years to help the High Yield Bond Fund survive the depths of market despair and to prosper in the subsequent strong recovery. ‘We anticipate that these features of our approach will be the foundation of future success too.’

Best UK Fixed Income Shortlist
Aegon High Yield Bond
Baillie Gifford Corporate Bond
Legal & General High Income
Gartmore High Yield Corporate

BEST FUND MANAGEMENT GROUP
First State Investments
Having won the ‘Best Specialist Group’ award last year and making the shortlist too in this category, First State just missed out on the big prize, losing to Jupiter Unit Trust managers.

However, with a clutch of its funds performing top quartile over the past year and inflows into these best-performing funds rising, First State has finally landed the recognition it deserves.

Gary Withers, managing director of the EMEA region for First State Investments, said that this was a reflection of the group’s long-term approach to investing, which has been maintained over many years, regardless of market conditions.

He explained, ‘This way, we ensure a close alignment with the best interests of our clients, whether they are retail or institutional investors, pension funds or wholesale distributors. Taking a long-term view also helps to support our teams’ independence and creativity.

‘We have carved out a reputation where our clients turn to us for innovative insights and solutions that will enable them to meet both their strategic needs and the needs of their customers.’

First State is part of the Commonwealth Bank of Australia, which is one of nine AA S&P-rated banks in the world and the second largest company on the Australian Securities Exchange.

Best Fund Management Group Shortlist
Standard Life Investments
Threadneedle
Baillie Gifford
Insight Investment

BEST GLOBAL EQUITY FUND
First State Global Resources
It was a double whammy for First State Investments this year, picking up the Global Equity Fund award amid exceptionally tough competition, notably from JM Finn and McInroy & Wood in particular.

Despite being the sixth-best performer over the past six months (in a sector of 208 funds), the fund is top over both one and five years and has a strong record for consistent returns too.

The judging panel felt that the fund has stuck word-for-word to its prospectus in how it has delivered returns and rightly deserves this year’s gong.

The fund aims to achieve long-term capital growth through investing in equities of resources and energy companies globally, although the fund’s management team does not take a view on short-term moves in commodity prices.
Its strategy dictates this because First State believes them to be notoriously unpredictable and notes that not all
prices move in the same direction at the same time.

Instead, the team looks at supply side fundamentals, where there are long-term structural constraints. Favoured companies tend to have strong organic growth credentials and be at the low end of the cost curve. Therefore, they are the type of companies that are likely to be less affected if commodity prices fall and profit margins shrink.

The team selects stocks by employing a ‘bottom-up’ investment approach and regards its first-hand knowledge of companies as a strategic advantage. Since the launch of the fund in 1997, the team has made more than 950 visits to mines and other sites in over 60 countries.

These visits help to identify and assess specific risks associated with companies and to decide whether a particular stock deserves either a premium or a discount to its valuation. A view of future company performance is formed through stress testing using different commodity price and currency scenarios.

Best Global Equity Fund Shortlist
McInroy & Wood Smaller Companies
JM Finn Global Opportunities
Invesco Perpetual Global Smaller Companies
Ecclesiastical Amity International

BEST GLOBAL EMERGING MARKETS FUND
Aberdeen Emerging Markets

Aberdeen’s Emerging Markets fund was the standout winner in this year’s global EM award category, having lost out last year to the fund’s rivals over at First State.

According to official statistics from the Investment Management Association, global emerging markets funds were the biggest seller in October and November last year, meaning that managers had a sharp increase in inflows to deal with.

Making the right investment when inflows spike can be tricky, so the shortlisted candidates all displayed excellent consistency in terms of their past performance as well as a track record for sticking to their mandates.

The award to Aberdeen, however, was a reflection of the team’s approach and focus on companies that deliver consistent earnings growth over the years, matched by strong cash flows and robust balance sheets.

Devan Kaloo, manager of the fund, explained, ‘During the financial crisis, balance sheet strength and transparency, as well as operational efficiency, became all-important, which suited our style well.

‘In addition, we have a tilt towards the consumer-driven, secular growth segments of the market, which have led the pack over the long term.

‘Generally speaking though, we just look to invest in companies with competitive business models, conservative finances and trustworthy management, and in the long term they usually deliver.’

Kaloo, however, said he would not be seduced by the glory of winning a What Investment award: ‘While this award is gratefully received and is recognition of our past performance, our focus remains firmly on the future and identifying those companies that are well equipped to benefit from the emerging market growth story, as well as being able to weather the inevitable fluctuations in developing and global economies.’

Best Global Emerging Markets Fund Shortlist
First State Global Emerging Markets Leaders
M&G Global Emerging Markets
F&C Emerging Markets
Baillie Gifford Emerging Markets Leading Companies

BEST UK EQUITY INCOME FUND
Henderson UK Strategic Income
After extensive debate between the judges, the Henderson UK Strategic Income fund was awarded the prize due to a combination of high dividend payouts, its recent considerable improvement and the consistency it has shown in the recent volatile markets.

Henderson’s pedigree in providing UK Equity Income funds was also recognised by the shortlisting of its standard UK Equity Income fund to make the final five.

Jamie Legg, spokesperson for Henderson Global Investors, said the Strategic Income fund aims to achieve a higher level of income, with the fund investing principally in the UK through a managed portfolio of investment trust shares and other closed-ended vehicles.

He said, ‘This award is testament to Paul Craig’s ‘bottom-up’ investment process and ability to identify securities, overlaid with a ‘top-down’ view of general economic trends to generate outperformance for his fund’s investors.’

Best UK Equity Income Fund Shortlist
Henderson UK Equity Income
Artemis Income
Vanguard FTSE UK Equity Income Index
Standard Life Investments UK EI Unconstrained

BEST UK EQUITY GROWTH
MFM Slater Growth
Mark Slater, chairman of Slater Investments and MFM Slater Growth Fund, is the winner of the Best UK Equity Growth award, in what was a highlycompetitive category.

Slater, a well-known figure in the investment world, said the award had validated the team’s hard work over the course of the past 12 months.

‘It is an honour to win the What Investment 2011 award for ‘Best UK Equity Growth fund,’ he said. ‘The fund focuses on dynamic growth companies mainly operating in growing niche markets enjoying a tail wind.’

‘We look for predictable growth and strong cash flows and build in a margin of safety by insisting on a low PEG [price/earnings to growth ratio] – a low p/e ratio in relation to the earnings growth rate.’

Slater added, ‘We believe that these relatively rare growth businesses will be rewarded disproportionately as they deliver dynamic growth against a generally lacklustre backcloth. We try to avoid businesses operating in challenging sectors.’

Best UK Equity Growth Shortlist
Cavendish Opportunities
Standard Life Investments UK Equity Unconstrained
M&G Recovery
Marlborough UK Leading Companies

BEST NEWCOMER
Insight – Absolute Credit

The Best Newcomer category showcases the very best in fund management and how investors have responded to their strategy since launch.

Only funds with a track record of less than two years were considered for this award, and from these funds 50 were added to a longlist based on the levels of inflows they had received over the past 12 months.

From here, the performance of each fund was reviewed over the same period and the structure of the investment portfolio deconstructed.

After this lengthy process was completed, the Absolute Credit Fund from Insight Investments was judged as this year’s winner.

Phillippa-Jane Vermoter, PR manager for Insight Investment, said the fund was launched with the long-term aim to offer investors an investment vehicle capable of producing positive returns regardless of the underlying condition of the credit market.

She explained, ‘This was something that few competitors were doing at the time. We aimed to use a variety of non-traditional methods of identifying opportunities and putting those into practice: idiosyncratic credit opportunities, exploitable pricing anomalies, long/short directional views, arbitrage and so on.
‘Uniquely for even an absolute return fund, the Absolute Insight Credit Fund’s returns since launch have been almost entirely derived from alpha generation, rather than beta.

‘In other words, the fund has not relied on market direction (either positive or negative) to generate its performance.
‘In addition, it has produced these returns with significantly lower volatility than would normally be expected with investing in this asset class, while risk-adjusted measures of performance are also exceptionally strong.’

Best Newcomer Shortlist
JM Finn UK Smaller Companies
Franklin Templeton Global Growth
Cavendish UK Select
Artemis Global Income

EDITOR’S CHOICE AWARD
Standard Life Investments
UK Smaller Companies
The fact that Standard Life’s UK Smaller Companies fund was soft-closed earlier this year is testament to just how well regarded this fund is among investors and financial planners.

Managed by Harry Nimmo, the strategy behind the returns shows that the fund’s exceptionally strong performance hasn’t come about simply from one decent year, but through year-in, year-out consistency.

The huge inflows of money that have been arriving since the turn of the year were enough to make the bigwigs at Standard Life get nervous and take steps to reduce the flood of new money coming into the fund.

When questioned about his investments, which are not in keeping with his sector peers, Nimmo gives an excellent account of his research style and demonstrates an astonishingly comprehensive knowledge of some 70 holdings.
Of all the managers interviewed over the past 12 months, Nimmo is without question, the one with the most comprehensive understanding of his holdings. A truly worthy winner.

Editor’s Choice Award Shortlist
Aberdeen Emerging Markets
HIM Income
Fidelity MoneyBuilder Growth
Schroder Japan Alpha Plus

MOST CONSISTENT FUND
Fidelity MoneyBuilder Growth
MoneyBuilder Growth was launched in 1994 with a remit to offer investors ‘lower-cost’ access to the UK stock market. It continues to be one of Fidelity’s most enduring and popular funds.

This award is recognition of the value that the MoneyBuilder Growth fund has delivered over the past 17 years.
The fund invests predominantly in the larger UK companies and strong performance has been delivered through stock selection and taking advantage of a combination of compelling valuation and exposure to the most exciting areas of global growth.

This, along with changing sentiment, is likely to bring value bubbling away within the UK’s largest companies
to the surface in the months and years ahead.

James Griffin, portfolio manager of the MoneyBuilder Growth fund, believes that after the tough economic environment of the past couple of years, the pendulum is likely to swing back in favour of the larger-cap stocks as they will be able to sustain their competitive advantage through their exposure to emerging markets.

He says, ‘In an environment of persistently low interest rates, the relatively high dividend yields offered by many blue-chip companies will prove attractive.

With many quality franchises trading at attractive valuations, large-caps provide a compelling investment opportunity that the MoneyBuilder Growth Fund is well placed to take advantage of.’ 

Most Consistent Fund Shortlist
Aberdeen Emerging Markets
JO Hambro CM European Select Values
Standard Life UK Smaller Companies
BlackRock Gold & General

Click here