Top 5 Mid-Cap funds
M’star Fund 1 year 3-year 3-year 3-year 3-year 3-year Launch Domicile
Rating size (£m) chg (%) chg (%) Sharpe Sortino Alpha Beta date
CF Holly Fund ★★★★★ 68.99 111.22 16.78 0.52 0.73 21.27 0.98 12 Dec ’03 UK
Royal London UK Mid-Cap GrthRetA ★★★★★ 47.84 55.03 3.21 0.08 0.11 5.57 0.91 1 Jun ’06 UK
Rensburg UK Mid-Cap Growth ★★★★★ 178.70 51.73 2.93 0.06 0.09 4.97 0.88 12 Jul ’99 UK
Old Mutual UK Select Mid-Cap Acc ★★★★★ 756.73 36.69 -1.33 -0.13 -0.18 0.62 0.87 11 Feb ’02 UK
Standard Life UK Eq Unconstrained ★★★★ 177.21 108.36 4.39 0.17 0.26 10.93 1.28 28 Sep ’05 UK
Source: Morningstar
tunities” within the FTSE
250 space.
He explains: “Large caps
are much more liquid now
and much more defensive.
While we still have a few
problems going on in markets,
they are probably the
best place to be invested.
Also, if you really are looking
for emerging market
and overseas growth these
mega-cap companies are
those that not only have
the best footprints in these
places but also, because of
the nature of their business
and the size of their balance
sheets, they are able
to coordinate themselves
much better and direct
their revenue growth to
those parts of the world.”
l The big picture
The earnings debate opens
up further scope for looking
at the actual differences
in the make-up of the FTSE
100 versus the FTSE 250, of
which there are many.
While the FTSE 100
is dominated by miners,
banks, pharma and tobacco,
managers working in
the FTSE 250 space currently
favour support services,
capital goods, technology
and media.
Michael Ulrich, manager
of F&C’s UK Mid-
Cap Fund, suggests that
investors need to look at
the bigger picture in terms
of how the different UK
market indices are constructed,
and thus formed
as benchmarks for multicap
UK funds.
He says: “The FTSE 250
is at the moment just over
10% of FTSE All Share with
exposure to what is seen
to be the most attractive
area of the market being
relatively small. You can
compare that to the largest
constituent of the FTSE
100, HSBC, which is close
to 8% of the index.”
Ulrich also raises a practical
point as to having a
greater opportunity to find
value further down the cap
scale where there is less
analyst coverage.
“It is a crowded market
and it is hard to spot the
anomalies in the FTSE
100. On our last count, the
average number of analysts
covering a FTSE 100
stock is 20, versus eight for
the FTSE 250, and that is
a figure which is skewed
towards to the top end as it
is usually two or three covering
a FTSE 250 stock.”
Despite these arguments,
there will always
be fundpickers who, whilst
they will own some mid-
cap funds, will tend to
look more towards a multicap
collective or place faith
in the skill of a stockpicker
who has free reign to
choose across the domestic
market.
l Active management
“If you look right across the
UK All Companies sector,
you will find a lot of the
good active managers will
be overweight in mid-caps
because some of their
best active money occurs
in companies just outside
the top 100,” says Aidan
Kearney, co-head of multimanager
at Aberdeen.
“It is very rare that you
will find an all-cap fund
which is overweight FTSE
100 and underweight midcap.
The good active managers
in the all-cap space
tend to run a structural
mid-cap overweight.”
Robert Burdett, cohead
of multi-manager
at Thames River, agrees,
saying he would prefer to
UK Large vs Mid-Cap equity funds – 5 yrs
50
40
30
% 20
10
0
-10
Jan ’05 Jan ’06
Source: Morningstar
UK Mid-Cap Equity
Jan ’07
UK Large-Cap
Growth Equity
Jan ’08
EQUITIES UK MID-CAP FUNDS
use the stockpicking skills
of the likes of Derek Stuart
of Artemis UK Special
Situations Fund and Caspar
Trenchard of Standard Life
UK Opportunities Fund.
He says: “We do not
feel the need to hold a
fund restricted to mid-cap
when we have managers
who can try to cherrypick
the best of that and other
areas.
It does not mean that
there are not good funds
out there, just in our overall
portfolio construction
we find ourselves typically
overweight mid-cap
anyway.”
However, for Spencer
avoiding mid caps is just a
“cop-out”, and he believes
that investors should be
concentrating on just picking
the best manager of
mid-cap money and the
best manager of largecap
money and should be
making their allocations
accordingly.
“Time and time again
we hear people say that
they will just pick somebody
to do the asset allocation
for them and pick
a multi-cap manager and
hope he gets it right,” he
asserts.
“Over last year, how
many multi-cap managers
were so overweight
mid-cap for it to make
a difference, and how
many were hiding in nice
safe defensive, allegedly,
blue chips – although
exactly how ‘blue chip’
banks and miners are is a
moot point.”
MARCH 2010 [www.portfolio-adviser.com] PORTFOLIO ADVISER
Jan ’09
Jan ’10
It is very rare
that you will find an
all-cap fund which
is overweight FTSE
100 and underweight
mid-cap. The good
active managers
in the all-cap
space tend to run a
structural mid-cap
overweight
“
”
Aidan Kearney, co-head of
multi-manager, Aberdeen
SUMMARY
The landscape for UK
medium-sized companies has
evolved in recent years with
better management teams, a
wider scope in industries that
are listed and more of a focus
on overseas earnings.
Many fundpickers say they
prefer to use a stockpicker
with free reign to invest
across the cap scale rather
than specific mid or large-cap
funds.
Mid-cap fund managers point
out that typical mega-cap
industries, such as miners and
banks, have not necessarily
been among the safest
equities in which to invest in
the past three years.
61
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