Waiting Room: Husselbee’s top picks of young funds in the Specialist sector

This month, attention turns to the Specialist sector, the home for non-mainstream equity-based funds. This is a diverse sector, where performance comparison of one fund to another is fairly meaningless to fund buyers.

Over the last three years Indian equity funds populate the top decile performers while a lower oil price has led to energy/commodity funds occupying the bottom of the performance table. This sector is divided into smaller categories of single country, sector, managed or thematic funds.

The Investment Association launches a new sector when there is sufficient choice of funds and buyer demand. It has a real challenge on its hands monitoring funds in the Specialist sector with so many investment constraints and parameters to take into account.

GAM Star Alpha Technology 

At first sight, GAM Star Alpha Technology may seem to fit appropriately into the Technology & Telecom sector. However this fund is a long/short equity portfolio investing globally in technology-related sectors and stocks.

As such, the hedged nature of the fund has been deemed not appropriate for the Technology & Telecom sector, and it is perhaps too specific to fit into the Targeted Absolute Return category. The fund is managed by Mark Hawtim following a mandate change.

Since the change of mandate there has been a small, positive return but this is somewhat behind the stated index. The portfolio is currently net long with a gross exposure near 190 per cent, this is invested from the bottom up and most holdings are US listed.

The fund’s assets are $18.3m and those fund buyers must be content with a performance fee which takes the stated TER to 1.73 per cent.

Polar Capital Healthcare Blue Chip  

The Polar Capital Healthcare Blue Chip fund was launched a couple of years ago by a team of six investment professionals led by Gareth Powell & Daniel Mahony. As the name suggests, the team focuses on large caps to build a concentrated portfolio of 25 to 30 names. The universe of companies cover pharmaceuticals, biotechnology, medical devices as well as healthcare services.

With an ageing population, particularly in the west, many investors see this sector as a growth opportunity as governments grapple with balancing fiscal books. The surprise US election victory of Donald Trump is likely to influence the returns of this fund in the years ahead. The fund has raised assets through subscriptions and performance to £38.1m with returns in the short term not far adrift from their chosen benchmark, MSCI World Health Care Index.

The thirst for income is never ending among investors. As such fund buyers have been turning their attention to alternative sources of investment yield.

VT UK Infrastructure Income

VT UK Infrastructure Income was launched at the beginning of the year and has been popular, using the current £85.8m fund size as a measure. The fund, managed by Gravis Capital Partners, expects to deliver a 5 per cent per annum yield.

Closed-end fund buyers will be familiar with the company’s three trust offerings in asset-backed lending, student accommodation and infrastructure. This fund will invest in similar listed closed-end vehicles to gain exposure to infrastructure. The fund has returned 9.6 per cent to investors since launch in a sector which has seen many headlines recently. In the UK there has been renewed talk of the construction of the high-speed railway link and the US President elect Donald Trump has promised money for new roads, bridges and airport terminals.

John Husselbee is head of multi asset at Liontrust.