What is the AJ Bell Favourite funds list?
The AJ Bell Favourite funds list is designed to lighten your research load. There are thousands of funds out there – so we’ve narrowed the field by selecting a high-quality shortlist of funds we believe can deliver their objectives over the long term. To make the list, each fund needs to pass our robust, independent selection process.
We keep our list up to date by regularly reviewing the funds we've chosen, and by monitoring the market to identify new funds we believe have the potential to achieve their objectives. From time to time, this leads to us adding or removing funds from the list.
What have we changed?
We’ve recently added the TB Amati UK Smaller Companies fund.
How does the fund work?
The TB Amati UK Smaller Companies fund has been run by Dr Paul Jourdan since 2000, with co-managers David Stevenson joining in 2012, and Anna McDonald joining in 2018. Each manager brings specialist expertise in different sectors – a strength bolstered by the recruitment of healthcare specialist Dr Gareth Blades in 2019.
The fund looks to deliver long-term capital growth through a diversified portfolio of UK smaller companies, which includes all listed companies outside the FTSE 100 index. The fund managers look to identify high-quality companies with competitive advantages that can sustain long-term growth, such as intellectual property, technological innovation and unique industrial expertise.
The team also run the Amati AIM VCT. This feeds ideas into the fund, with investments in the VCT fund able to be included in the main fund when they reach a level of maturity. This pipeline of ideas, from early-stage venture capital all the way up to FTSE 250 companies, is a key feature of the Amati process. By investing early in the development of a company, the fund can gain exposure to the full runway of potential growth.
The managers like the fund to be diversified by sector and sensitivity to the broader economy. This helps it negotiate the swings in market sentiment associated with new developments in uncertain times. The fund will also contain stocks of different sizes by market cap, from the AIM market at one end to the FTSE 250 at the other. These exposures will alter depending on the managers’ conviction in opportunities at any given time.
Why have we decided to add the fund?
The TB Amati UK Smaller Companies fund has an impressive long-term track record: since Dr Paul Jourdan took over in September 2000 to the end of 2020, the fund has outperformed its Numis Smaller Companies benchmark significantly.* With an OCF of 0.89% – classified as ‘below average’ in cost by Morningstar – it is a value-for-money option for investors looking for exposure to UK smaller companies.
Before adding this fund to our Favourite funds list, we had only two options in the UK small-cap space: the TM Tellworth UK Smaller Companies fund and the Franklin UK Smaller Companies fund.
The Amati fund has a forensic focus on quality companies, looking to unearth structural growth opportunities that have lower debt than their peers. It invests across a broad array of sectors and themes to benefit from diversification. Another key strength is its ability to draw from its AIM VCT fund, identifying emerging innovations at an embryonic stage and providing a pipeline of opportunities for the UK Smaller Companies fund. As such, the fund’s philosophy and process differentiates it from the existing funds in our list.
*Source: Morningstar Direct
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