AJ Bell Favourite funds list update


Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

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.

What have we changed?

We keep our Favourite funds list under constant review to ensure we have the highest conviction in the funds on the list and also to see if new funds have better potential to achieve their objectives.

As a result of this work, we’ve recently removed the Liontrust Special Situations fund, and added the BlackRock UK Special Situations fund.

Why have we removed the Liontrust Special Situations fund?

The Liontrust Special Situations fund has been one of the best-performing UK equity funds over many years. As a result, it has become hugely popular, attracting a significant number of investors and growing to over £6bn in size. Part of the driver behind this excellent performance is its exposure to smaller companies, including those listed on the AIM market.

However, we feel that if the fund continues to grow, there’s a risk that the fund could become too big to gain meaningful exposure to these exciting smaller companies. This would potentially hamper its performance. Additionally, if many investors decide to sell out of the fund, some of its positions in smaller companies could prove harder to sell.

Why have you added the BlackRock UK Special Situations fund?

BlackRock UK Special Situations is a UK equity fund that looks to deliver long-term capital growth by investing in UK-listed companies. The fund has a bias to companies outside of the FTSE 100, and normally has at least 50% invested in medium and smaller companies which the manager believes are able to sustain superior growth over longer periods of time.

The fund is managed by Roland Arnold, who’s been a co-manager on the fund since 2012 and was made sole manager in 2019. Arnold sits as part of the UK emerging companies team and has been at BlackRock for over 20 years.

The investment approach is bottom up, with company meetings playing a critical role in the process. This is because the philosophy focuses on buying companies, not share prices – so garnering a deep understanding of a company is key before they make any investment. Building strong relationships with company management is also a major part of the process. The resulting portfolio will typically hold 60–80 high-conviction positions.

Is this fund similar to Liontrust Special Situations?

The BlackRock UK Special Situations fund is somewhat similar to Liontrust Special Situations as it focuses on medium and smaller companies listed on the UK stock market. About 30% of the BlackRock fund is invested in the same companies as Liontrust, while the other 70% is invested in companies which are different – albeit many of which share similar characteristics.

However, the important difference is that BlackRock UK Special Situations is smaller, at around £600m in size. This gives it more flexibility to invest in smaller companies without being potentially impacted by its size.

We hope you find this update useful. Please remember that it falls to you to monitor and manage your own investments and to make any changes you think are necessary. Keep in mind this is information only, and not a personal recommendation to buy or sell any of the funds referenced above.

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Written by:
Ryan Hughes

Ryan Hughes is Head of Investment Research at AJ Bell. Ryan started his career in 1999 working for an independent financial adviser, progressing to become Head of Portfolio Management at an award-winning advisory firm. Ryan then joined a global asset management firm as a Fund Manager, where he oversaw more than £10bn of multi-asset portfolios and also sat on the investment and global asset allocation committees. After seven years, Ryan joined a small multi-asset boutique managing portfolios for clients all around the world, before joining AJ Bell three years later to help establish our investment capability. As Head of Investment Research, Ryan now oversees all actively managed investment solutions and fund research.