Old Mutual has introduced an offshore fund that aims for capital growth by investing in smaller companies within the UK.
The Old Mutual UK select smaller companies fund will invest in companies valued at less than £1bn. It is expected to contain between 50 and 60 stocks. Individual stocks will not represent more than 5 per cent of the portfolio.
Ashton Bradbury, who currently manages Old Mutual's onshore fund of the same name, will also run this fund. Bradbury joined Old Mutual in September 2000 from Hill Samuel. He also managed the HSBC smaller companies trust between 1996 and 1998.
Bradbury's management style is to combine top-down and bottom up approaches to stockpicking with value and growth investment styles as he sees fit. A top-down approach looks at the bigger picture first, analysing factors such as interest rates and economic growth, before selecting companies that are likely to benefit from what is happening. A bottom-up approach involves putting individual stocks under a microscope in terms of its management team, growth prospects and financial position.
When looking for growth stocks, Bradbury will aim to find companies that have the ability to grow and increase its share price, while value stocks will be companies that look undervalued.
The benefit of investing in smaller companies is that the potential returns are higher than investing in larger companies because they have more scope to grow. However, this is matched by increased investment risk as there is no guarantee that smaller companies will survive if larger competitors try to squeeze them out of the market.
According to Standard & Poor's, the Old Mutual UK select smaller companies fund is ranked 3 out of 74 funds based on £1,000 invested on a bid-to-bid basis over six months to January 14, 2002.