Resolution UK smaller companies manager David Clark believes the argument that small caps are coming off the boil in favour of their largercap counterparts could not be further from the truth.
Clark, who has managed the fund since 2004, says that being a bottom-up stock picker means there are always going to be opportunities in a market as diverse as small caps.
He says he runs a portfolio of typically between 70 to 100 stocks (currently 84), with turnover gradually lowering each year that he spends on the fund.
Clark says: “As you would expect when a new manager comes in, there is typically a large amount of volatility and turnover. For example, when I first came in, back in 2004, after 12 months the turnover was about 120 to 130 per cent, now it is around the 40 to 50 per cent mark, although that may rise later this year.”
Although the fund is currently holding 43.5 per cent in the industrial sector, Clark says he is not heavily invested in the sector as he is willing to adopt all sorts of stocks within the portfolio provided they offer good value.
“I am not contrarian and I do not like to the idea of managers being pigeonholed as such. If I am anything. I would say I am more growth than value-orientated but I still would not like to be placed in that box.
Clark says he is well weighted in oil services and mining sectors while the broad spectrum of the services market has also served him well. One stock that has consistently performed is the Chloride Group, which provides power protection for businesses.
“We have been in the stock for a long time and it has been a fantastic performer for us. What it does is ensure there are no power cuts for large companies who may be undertaking large amounts of work, something which is becoming more prevalent with the degradation of our power supply in the UK. It has been a flat performer recently but it is off the back of phenomenal performance, which we expect to see again.”
Clark took over the 117m portfolio in November 2004. The vehicle now has a strong three-year track record , coming third out of 48 in the IMA UK smaller companies while over one year it has topped the sector, returning 35.3 per cent.
What brokers think of the fund Justin Modray, head of communications, BestInvest
Justin Modray, head of communications, BestInvest
“It has had a rather dismal display historically prior to Clark’s appointment back in November 2004 but since then he has consistently outperformed the FTSE small-cap index. We have not met him yet but considering he has been there two-and-a-half years I would assume we will be meeting him soon.”
Mark Dampier, head of research, Hargreaves Lansdown
“It used to be a fund I supported. It has been poor for such a long-time so full credit to David on turning the performance around. The one trouble he faces is that the UK smaller companies is not exactly in favour at the moment and there is also some strong competition from the likes of Old Mutual Asset Managers and Standard Life.”