HL recommends switch out of Invesco Perpetual UK Smaller Companies

Hargreaves Lansdown has advised investors in the Invesco Perpetual UK Smaller Companies Growth fund to switch into Harry Nimmo’s Standard Life Investments small-cap offering.

Meera Patel, a senior analyst at Hargreaves Lansdown, says Invesco Perpetual manager Andy Crossley prefers to invest in smaller, economically sensitive companies, so it is little surprise he struggled with the onset of recession in 2008.

“However, we expected it to capitalise on any subsequent bounce as the economic picture improved and the market regained lost ground,” she adds. (article continues below)

“But during 2009’s recovery, which was led by more economically sensitive sectors, the fund underperformed its peers. Our analysis suggests the manager’s poor stock selection was the primary cause.”

Patel says the fund’s below-par performance has continued into 2010 and sees no significant reason why the stock selection within the portfolio will improve.

As an alternative, Hargreaves suggests the Standard Life Investments UK Smaller Companies fund, headed up by Nimmo – the sector’s best performer over five years.

“What sets this fund apart from its peers is the exceptional stockpicking talent of its manager,” adds Patel.

“He has managed this fund since its launch in 1997, looking for companies with proven business models and recurring revenues. Given the quality of the manager, we believe SLI UK Smaller Companies is well placed to deliver excellent long-term returns.”