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Six stars: our pick of the top UK small cap managers
by Jonathan Miller on Mar 12, 2014 at 07:00
The sector has been on a stunning post-crash run, but one manager stands out. Click through to find out more, and learn about our new analysis tool Citywire Discovery.
Leading lights in the UK
Strong performers abound in the UK Smaller Companies sector, which has had a stunning post-2008 crash run, but one manager stands out.
For investors looking for an experienced manager in the UK Smaller Companies sector whose return is outstanding on both a 10-year and three-year basis, one name stands out: Paul Marriage. His top performance over both periods takes him to the upper right-hand corner of the graph (see next slide). Click through to see how Marriage has performed compared to his competitors.
The analysis comes from Citywire Discovery, a new desktop system that allows fund buyers and fund groups to access track records of over 9,000 managers tracked by Citywire. It provides unique insights into peer group analysis, performance comparisons and competitor analysis. For more details contact firstname.lastname@example.org
Marriage sees the potential
Marriage is exceptionally good at doing what smaller cap managers do best: finding under-researched companies with strong growth potential. However, his fund in this sector is now hard closed, and it will be harder for him to continue his success as the fund is now a large £1.3 billion in size.
Also outstanding over a 10-year period are Daniel Nickols, Harry Nimmo and Giles Hargreave. Nimmo’s performance has slipped a little below average during the past three years, perhaps reflecting his lower risk approach (he had a relatively good 2008 crash).
Missing from our 10-year chart entirely is strong performer Philip Rodrigs, because his experience in the sector is less than eight years.
Click through the gallery to see the scorecards on Marriage's competitors.
Note: The size of the bubbles on the graph denote market share. The vertical axis shows the percentile rank of 10-year total return, so the best managers are nearer the top. The horizontal axis shows the percentile rank of three-year total return, so for this period the best managers are nearer the top right.
Harry Nimmo, Standard Life Investments
10-year total return: 378.6%
Three-year total return: 56.2%
Market share: 12.2%
Harry Nimmo has delivered outstanding returns over his long career. He refuses to follow what could turn out to be short-lived booms, like the recovery in UK house-building, and this is partly why he is behind the very best over the past three years. Standard Life Investments UK Smaller Companies is a large fund, and was soft closed when it reached £1.3 billion in 2011. Key holdings include British brands Asos, Ted Baker and Superdry, which are leveraging the internet to grow internationally.
Daniel Nickols, Old Mutual Global Investors
10-year total return: 385.1%
Three-year total return: 64.4%
Market share: 8.5%
Daniel Nickols has responded to the UK recovery differently from Nimmo, and has taken on more risk in cyclicals. Recent winners include house-builder Galliford Try, estate agency Foxtons and equipment rental company Ashtead. Nickols has recently added to positions in estate agency Savills, and XP Power, which makes power supply components.
Along with several other managers on this page, Nickols held video search company Blinkx, whose shares tumbled after a Harvard Business School professor raised questions about its methods of generating ad revenue.
Paul Marriage, Schroders
10-year total return: 406.0%
Three-year total return: 110.2%
Market share: 7.1%
Paul Marriage is the brightest star in the UK Smaller Companies sector, based on 10-year and three-year total return. An energetic visitor of companies, he prefers fundamental, bottom-up analysis, and when asked for top-down views has been heard to retort ‘Macro? Schmacro!’
The Cazenove UK Smaller Companies fund, which he currently manages with John Warren, will be renamed the Schroder UK Dynamic Smaller Companies fund at the end of March. It was hard closed on 22 January.
Daniel Hanbury, River and Mercantile
10-year total return: 291.1%*
Three-year total return:74.0%
Market share: 1.6%
Daniel Hanbury manages the River and Mercantile UK Equity Smaller Companies fund, but on 14 March this will pass to Philip Rodrigs, who is joining from Investec Asset Management. Hanbury will focus on the UK Equity Income fund instead. Rodrigs’ performance is equal top with Marriage and Hargreave over seven years.
Hanbury’s largest holding is software company Quindell, which Hargreave has been selling. Other strong performers include GW Pharmaceuticals, whose natural cannabis product is used to treat multiple sclerosis and cancer pain.
* contains three years of average manager performance
Neil Hermon, Henderson Global Investors
10-year total return: 240.2%
Three-year total return: 67.2%
Neil Hermon, who has a maths degree from Cambridge and is a chartered accountant, brings strong analytical skills to bear in managing the Henderson UK Smaller Companies fund. He is optimistic on UK equities, pointing to strong company balance sheets, growing dividends, and the prospect of mergers and acquisitions activity.
He has done well from house-builders Bellway and Taylor Wimpey, and from Ashtead, which Nickols also holds. Another winner has been Thomas Cook, which turned around from near bankruptcy three years ago.
Giles Hargreave, Marlborough Fund Managers
10-year total return: 365.4%
Three-year total return: 64.5%
Market share: 9.2%
Giles Hargreave remains bullish despite the US Federal Reserve’s tapering, but he expects more volatility and plans to use this opportunistically. He recently sold pub operator and brewer Marston’s as it seemed expensive. He also sold off part of his Blinkx holding.
He has recently added to Regeneris, an economic research company, and Plus500, a trading platform for Contracts for Difference. New purchases include semiconductor company CSR and recruitment firm Robert Walters.
Like fellow-veteran Nimmo, he holds Supergroup, the company that owns Superdry.