The chances are that you have not invested a single penny in the UK’s top-performing fund this year.
This is because the fund in question is big enough to achieve better than average returns but still fly below the radars of most investors.
The Investec UK Smaller Companies fund has outperformed almost all of its peers during the last year and left the FTSE 100 (FTSEINDICES:^FTSE) trailing in its wake.
Indeed, during the past 12 months the £651.5m fund, managed by Ken Hsia has returned a staggering 41% beating its benchmark, the UK Smaller Companies Index and the FTSE 100 by 14% and 37% respectively.
So, what is the key to this market beating funds success?
The secret to success
Unfortunately, with over 40 shares within the fund’s portfolio, it’s not possible to analyse all of the fund’s holdings at once but here are the top five.
The two biggest holdings, together accounting for 6.9% of the total fund, are insurance outsourcer Quindell (LSE: QPP) and financial services firm Plus500 Ltd, both of which have seen their share prices rocket this year.
That said, Quindell has recently been the subject of a shorting attack, which has sent the company’s shares down nearly 50% at time of writing. Still, Plus500 has performed extremely well so far this year, the company’s shares have risen 89%, offsetting Quindell’s declines and highlighting the benefits of diversification.
The next two holdings, accounting for 5.3% of the fund’s total, are National Express (LSE: NEX) and Utilitywise. Up around 43% year to date, Utilitywise is another one of the fund’s start performers. However, National Express has let the team down, only retuning 1.5% so far this year, although the 3.6% dividend yield does go some way to improving performance.
And lastly, the funds fifth largest holding is Dixons Retail (LSE: DXNS). Dixons’ performance has been mixed so far this year. The company performed well during 2013 after it emerged from a restructuring but the share price got ahead of itself and was forced to take a step back after the company’s management warned that 2014 trading was going to be softer than expected.
Nevertheless, according to City sources Dixons is currently on the verge of announcing a merger with Carphone Warehouse, a deal that would slash costs and boost profits across the two groups.
Hunting for growth
While this group of five companies has outperformed the wider market during the space of the last year, it remains to be seen if their growth can continue.
The key, when searching for growth stocks, is looking under the radar. You want to get on board while the company is still an unknown quantity. Sadly, the growth stories at Quindell, Plus500, Utilitywise and Dixons are already well known.
