The Biggest and (Arguably) The Best

A look at some favourite UK-based funds and fund managers based on assets under management

Alanna Petroff 21 February, 2012 | 1:02PM
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Investors who are looking for a 'tried, tested and true' fund may want to consider investing with fund managers who are already managing billions and have a long track record in the industry. While history has shown that investing with the herd is not always the best move, clearly the funds and managers that attract the most capital must have done something right to earn the trust of so many investors. The following list examines five UK-based fund managers and teams who manage tens of billions of pounds in assets and are highly rated by Morningstar analysts.

Manager: Neil Woodford
Invesco Perpetual High Income
- Assets under management: £11 billion
- Began running the fund in 1988

Invesco Perpetual Income
- Assets under management: £9 billion
- Began running the fund in 1990

Fund manager Neil Woodford currently manages two of the largest funds in the UK; Invesco Perpetual High Income is the largest, while Invesco Perpetual Income is the third largest. Both the funds are run in a similar manner and have received a Gold Rating from Morningstar, indicating that analysts believe the fund will outperform its peer group and/or relevant benchmark on a risk-adjusted basis over the long term. According to the latest Morningstar research, "Management is a key strength here. Neil Woodford has been at the helm [for over two decades]. Such a long tenure is seldom seen in the fund industry. He works in a collegiate environment and is supported by the other managers on Invesco’s UK equity desk and within the wider equity group ... His approach to portfolio construction is distinctive and he is willing to back his judgment through sizeable bets. He is also willing to shift the fund’s emphasis between defensive and cyclical areas of the UK market, depending on his macro views."

But Woodford doesn’t just focus on those two funds alone. He also manages just over £1 billion in the Edinburgh Investment Trust, he runs a pension fund and co-manages investments in two other Invesco funds. Taken all together, Woodford is managing well over £20 billion in client money.

Manager: Tom Dobell
M&G Recovery
- Assets under management: £8 billion
- Began running the fund in 2000

This Gold-rated fund is a favourite amongst Morningstar’s UK analysts, who are particularly impressed by the fund’s stable management. "Just three managers have guided the fund over its 40-year lifespan. Current manager Tom Dobell took charge in March 2000 and is supported by deputy managers David Williams and recent addition Michael Stiasny ... Dobell invests in companies that are in recovery situations and, in particular, companies that have undergone management changes or have underperformed the market," said analyst Chetan Modi in his latest research report. "Dobell has rewarded investors with stellar performance over the long term. The fund returned an annualised 8.2% between 1 March 2000 and 31 May 2011, which comfortably outpaces the benchmark and average Morningstar category peer by 4.5 and 5.2 percentage points, respectively." This is currently the fourth-largest UK-domiciled fund.

Manager: Richard Woolnough
M&G Optimal Income
- Assets under management: £6.5 billion
- Began running the fund in 2006

This fixed-income-focused fund has been managed by Richard Woolnough since it launched in late 2006. Analyst Marianne Weller explains in her latest research report that Woolnough is highly regarded and he is "one of the more experienced fixed-income managers in the industry," after beginning his career in 1985. "The fund is a suitable choice for investors wanting unconstrained fixed-income exposure with a modest equity stake," said Weller. His fund is the fifth largest UK-based fund and it has a Silver Rating, indicating analysts believe it will outperform its peers.

Manager: Graham French
M&G Global Basics
- Assets under management: £6 billion
- Began running the fund in 2000

While this Gold-rated fund underperformed in 2011 compared to its peers, Morningstar analyst Oliver Kettlewell explains in a recent report, "we're not concerned with this fund's short-term underperformance." The fund focuses on investing in the "global economy’s building blocks - the basic needs and wants of the global population. These have a degree of stability in the long run, but they can fluctuate in the short term based on sentiment and the economy," said Kettlewell. The fund’s Gold Rating is based on French’s two-decade track record at M&G, combined with a solid investment team that supports French. The fund is the sixth largest UK-domiciled fund.

Manager: Richard Buxton
Schroders UK Alpha Plus
- Assets under management: £3 billion
- Began running the fund in 2005

While this fund is significantly smaller than the above listed funds at just under £3 billion in assets, Morningstar analysts admire Buxton’s investment style and track record. Plus, £3 billion is certainly nothing to sneeze at. The fund has received a Gold Rating and is amongst the top 30 largest funds in the UK

"Richard Buxton has been in charge here since the fund was launched in July 2002. Buxton is a seasoned manager with over 24 years’ experience, but he also benefits from the support of the close-knit UK equity team at Schroders," said analyst Modi in his latest research report. "[Buxton’s] approach aims to identify stocks that he believes will rise in value by at least 10%-20% for the ensuing three years. Philosophically, he tends to be a rather contrarian investor and is prepared to wait for long-term ideas to come to fruition."

But while Schroder UK Alpha Plus is considered one of the best UK equity funds around, Modi warns that "investors should be prepared for a bumpy ride." Therefore, this fund is only suitable for investors with a high risk tolerance. 

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.