Standard Life UK Smaller Companies fund
Sheridan Admans, investment adviser at The Share Centre, explains why investors seeking exposure to the UK equity market should consider blending traditional big blue chip funds with the Standard Life UK Smaller Companies fund.
As the UK economy continues its slow and winding recovery from recession and many UK companies continue to be cautious in their outlook for 2011, there is a school of investors who believe companies listed on UK markets are offering valuations and opportunities rarely seen.
In particular, for those prepared to venture away from traditional core blue chip style funds and move down the market cap scale to focus on small to mid cap companies, the potential rewards may be greater.
History has taught us that whenever an economy and stock market suffer it is generally the small and mid-cap companies that produce the biggest losses. The reverse is also true when the recovery starts, and we would therefore recommend a blend of funds, compromising of traditional big core blue chip funds and exposure to the small to mid cap arena.
As the name says the Standard Life UK Smaller Companies fund offers exposure to the companies with a smaller market cap and some mid market opportunities. It is important for investors to note that this does come at a higher risk than other UK equity funds that focus on mainstream blue chip companies.
This fund is suitable for an investor wishing to diversify their overall UK equity holding and who is prepared to accept a higher degree of risk and seek the potential for growth over income.
The fund is managed by Harry Nimmo, who has been at the helm since the fund was launched 12 years ago. The fund team initially look to identify companies that will become tomorrow's larger companies, it will then look to seek out companies that meet a specific set of typical indicators such as earnings upgrades, director dealings, price momentum and dividend yield. The final stage is then for the team to meet with the potential companies.
In terms of performance, it has been a 1st quartile performer on a cumulative basis over 1, 3 and 5 years
The Standard Life UK Smaller Companies fund has an annual charge of 1.5% and an initial charge of 4%. The minimum initial investment is £500 and the minimum additional investment is £500.
As the fund features in The Share Centre's Platinum 120 range, customers of the retail stockbroker wishing to invest in the Standard Life UK Smaller Companies fund will not have to pay the initial charge or purchase dealing commission. Customers can also invest in the fund from as little as £10.