If you’re looking for big gains from the stock market it can pay to be a bit less ‘mainstream’ with your investments. In other words, consider diversifying away from the popular FTSE 100 index and the same old mutual funds, in favour of more niche growth investments.
Today I’m profiling three under-the-radar mutual funds that have generated spectacular returns for investors in recent years and absolutely smashed the returns from the FTSE 100 index. Could these funds help you retire wealthy?
CFP SDL UK Buffettology Fund
This fund came to my attention recently when I was browsing through Hargreaves Lansdown’s top performing UK (all companies) funds on a one-year basis. Over that time frame, the fund is actually the best performer on the investment platform with a 12-month return of a high 23.4%. And it’s not a one-year wonder either – over three years, the fund is up 69.1% and over five years it has returned an amazing 117.3%.
The £409m fund is run by Keith Ashworth-Lord of boutique asset manager Sanford DeLand Asset Management. As the name suggests, the portfolio manager takes a Warren Buffett-esque approach to investing, looking for excellent businesses at an excellent price. The top holdings of Games Workshop Group, Bioventix, AB Dynamics, Dart Group, and LionTrust Asset Management suggest that the portfolio manager clearly has a small-cap focus here. Fees are relatively high at 1.3% per year through Hargreaves, but with such excellent performance figures, the fees don’t look unreasonable.
Marlborough UK Multi-Cap Growth Fund
Another boutique manager that has a number of top-performing mutual funds is Marlborough, which is headquartered in Bolton. Its UK-Multi-Cap Growth Fund has performed particularly well, returning 12.9%, 57% and 94.8% over one, three and five years respectively.
This fund aims to provide medium to long-term capital growth by investing in an actively managed portfolio of small, medium and large-cap UK equities. Portfolio manager Richard Hallett focuses on companies that have sustainable competitive advantages and are leaders in their industry. Currently, the top holdings include Worldpay Group, Homeserve, GB Group, Burford Capital and Craneware. With ongoing fees of just 0.82% per year through Hargreaves Lansdown, I believe this one is worth a closer look.
Slater Recovery Fund
Lastly, check out the Slater Recovery Fund, which is run by top stock-picker Mark Slater. Over five years, this fund is the third-best-performing UK (all companies) equity fund on Hargreaves Lansdown returning 109.6%. It’s also performed very well over one and three years, returning 12% and 45.6% respectively.
Launched in March 2003, this fund is quite unique. While the core of the portfolio is invested in high-quality companies that have low P/E ratios relative to their earnings growth, it also invests in recovery situations and shares that are trading at discounts to asset value. Currently, the top five holdings include Hutchison China Meditech, Restore, First Derivatives, Avation, and Bellway.
With an ongoing fee of a reasonable 0.82% per year through Hargreaves, this fund could be an excellent way to add diversification to a portfolio due to its niche approach to investing.
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Edward Sheldon owns shares in First Derivatives. The Motley Fool UK has recommended AB Dynamics, Craneware, Homeserve, and Liontrust Asset Management. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.