Large caps in the UK are good for income investors – the UK offers one of the best yields of any equity market – but growth is more appealing for my circumstances.
In terms of which fund, the winner is Fidelity UK Smaller Companies. I want a mix of mid- and small-caps (the smaller end tends to offer more risk but higher growth prospects, so I’m happy with a balance), and this fund offers just that.
Its method – to look for companies that have gone through a bad patch but where there are signs of positive change – is also compelling, particularly for my portfolio. This investing style, part of “value” investing, also serves as a good balance to some of the more “growth”-oriented funds that I already have in my portfolio, such as the Baillie Gifford China fund.
And its track record is great: over the past three years, it’s returned 19pc at a time when other smaller companies’ funds have lost an average of 15pc. Holdings include the defence engineer Babcock, the share price of which has risen by 71pc over the past year, and Serco Group, which is up 22pc. The manager, Jonathan Winton, has done a good job since he took the reins in 2014.
It’s a shame that arguably, the same can’t be said for Gareth Southgate’s performance – but I’ll be backing both managers for the foreseeable, regardless.