The UK All Companies sector is the largest and most diverse of all of the Investment Management Association categories, accounting for around 17 per cent of all UK-authorised open-ended funds by number, and nearly a quarter of the total funds under management.

This is because it is another of the sectors into which a range of funds with different investment objectives can be put. The large number of funds in our Lipper Leaders table this month is an indication of how difficult it can be to make comparisons between funds within the UK All Companies sector, because it includes such a wide diversity of funds.

A catch-all sector
The simple definition of what constitutes a UK All Companies fund is that it should have at least 80 per cent of its assets invested in UK equities and a primary focus on capital growth. However, some income funds do find their way into the sector by virtue of their not meeting the specific yield requirements for the specialist income sectors, and the capital growth brief also covers a multitude of investment strategies.

Here you will find generalist UK growth funds, with no particular bias to any theme or size of company. You will also find funds that concentrate on large-caps or on mid-caps, you will find index trackers, actively managed portfolios and ‘focus funds’ with highly concentrated portfolios and a focus on total return. There are ethically screened funds and there are other funds with very specific investment briefs.

The ethical funds provide an interesting case study, as most seem to be grouped in this sector, including even the pan-European-focused Insight European Ethical fund. The sub-groups table is an attempt to impose some order on this most diverse of sectors, by breaking it down into its basic constituents. We have used a combination of Lipper’s global classifications and the general classifications for ethical and index tracking funds, to give a general idea of the approach of different groups of funds within the wider UK All Companies sector.

A range of possibilities
However, the fact remains that choosing a fund from this particularly diverse sector will pretty much depend on what your specific investment objective is. Are you looking for
a broadly based UK portfolio that is going to diversify your risk across a spread of sectors and sizes of company, or will you actually be looking for something more specific?

To take the Lipper Leaders analysis as a benchmark then, perhaps unsurprisingly, the expense category is dominated by the index-tracking funds. Indeed, you would probably want to know why an index tracker is not on that particular list, since their cost base is inherently much lower than for actively managed funds.

For this reason, those active portfolios that do show up well on an expense basis deserve particular praise, notably Merrill Lynch UK Equity and F&C UK Ethical. Liontrust Top 100 is categorised by Lipper as an index fund but this is not strictly the case as it does operate a managed portfolio, albeit concentrating on the constituents of the FTSE 100 Index.

Seeking outperformance
However, cost is only one element of choosing a fund – investors will be much more concerned with identifying those funds within the wider sector that have consistently outperformed their particular sub-groups. In this respect, Merrill Lynch UK Equity stands out as not only scoring well with regard to cost-effectiveness, but also maintaining an impressive record for consistent performance on total return.
Indeed, Merrill Lynch (now BlackRock) has a very strong track record in UK equity management, with the group’s UK and UK Dynamic funds also showing up well on a performance analysis basis.

Other strong candidates among the more general UK equity portfolios include Jupiter UK Growth, M&G Recovery, Marlborough UK Leading Companies and Standard Life UK Equity Growth, while the newer funds with promising records include CF Walker Crips UK Growth, Legal & General UK Growth, Liverpool Victoria Growth, Scottish Friendly UK Growth, Newton UK Opportunities and  CF Taylor Young Growth & Income.

Among those funds with the more concentrated or thematic portfolios, potential stars would seem to include the previously mentioned Merrill Lynch UK Dynamic, JPM UK Dynamic, S&W Marathon, Saracen Growth Alpha and Schroder UK Alpha Plus,
while the best of those concentrating on the mid-cap area of the market are undoubtedly Old Mutual UK Select Mid Cap and Rensburg UK Mid Cap Growth.

The mid-cap area is one that has proved particularly profitable over the recent stage of the UK market cycle. Indeed, standing out among the index trackers, if that is not a contradiction in terms, is HSBC FTSE 250 Index, while among the ethically screened funds, clearly the most consistent record is that of AEGON Ethical Equity, with F&C Ethical and Allchurches Amity showing consistent results. Among the newer funds, Real Life and the RBS FTSE 4Good Tracker (which combines ethical screening and index tracking) are also showing up well.

And then there is Fidelity Special Situations. The fund was managed by Anthony Bolton for nearly three decades, and reached over £6 billion in size at one point on the back of his investment style focused on identifying long-term value stocks. The portfolio was split in half a year or so ago as Bolton began the process of handing over to
two new managers. Currently, Fidelity Special Situations is just over £2.9 billion – but the consistency of performance seems to have been maintained, indicating that size is no barrier to success in a mature and broadly diversified market
such as the UK.