SLI�s Harry Nimmo still top of Citywire rating and relishing a challenge, writes Ian McConnell

Harry Nimmo, manager of Standard Life Investments' £380m UK Smaller Companies vehicle, is thriving in the current tough stock market conditions and has made it nine in a row at the head of The Herald's monthly table of top-performing asset managers with Scottish fund houses.

Nimmo, who extended his run when the latest investment performance figures for the three years to June 30 were compiled by financial publisher Citywire, also took top spot UK-wide for a seventh consecutive month.

David Clark, who looks after Glasgow-based Resolution Asset Management's Smaller Companies fund, remains hot on Nimmo's heels.

Clark has now been second-placed in the Scottish table for nine months, and has been ranked second UK-wide for seven months in a row, the entire period of Nimmo's winning run.

Nimmo, if he can hold his top place north of the border when performances to July 31 are tallied, will match his record-breaking, 10-month reign at the head of the Scottish top flight which was ended by Clark in the second half of last year. Clark swapped places with Nimmo for two months at that stage - before their roles reversed again.

The Standard Life Investments' Smaller Companies fund manager was in fine fettle when contacted by The Herald about the continuation of his spectacular run.

He said: "We appear to be moving rapidly towards recession in this country. If you are invested in high-quality growth (stocks), more resilient names that are not exposed to some of the obvious consumer-facing or interest rate-sensitive sectors, you are in better shape.

"Where the fund is not investing is real estate, financials, media, housebuilders, all these areas that seem to be in real trouble."

Emphasising that his fund was sticking with the investment process it had had since its launch 11-and-a-half years ago, targeting stocks with "quality growth and momentum" as opposed to taking a value approach and "diving around trying to catch the bottom", Nimmo added: "We do tend to do better when markets are risk-averse because we are too."

Referring to his fund's top 10 holdings, he said: "Pretty much all of them have come out with positive trading statements in the last four to six weeks. We are certainly not seeing, among our major holdings, any signs of stress at all."

Nimmo added that SLI Smaller Companies was "not involved" in retailers, with the exception of on-line fashion player Asos (As Seen on Screen).

Noting that Asos had come out with a "stunning" trading statement the week before last, he said: "It is quite a marked contrast to Marks & Spencer, who basically do the same thing through shops, having a kind of profits warning two days later."

Nimmo thus concluded it was possible to make money in a difficult sector if "you are backing solid business models which are doing business in a different way".

He added that Telecom Plus, another major holding of his fund which puts together household electricity and gas, phone and broadband provision on a single bill, had had "the opposite of a profits warning".

Nimmo also noted two of his fund's big holdings had been involved in bid situations recently. Oil services company Expro International, a top five holding, is being taken out by a cash bid from venture capitalist Candover and investment bank Goldman Sachs.

Nimmo noted that Chloride Group, which makes and sells uninterruptible power supply systems, was on the end of a bid approach from Emerson.

Even though Emerson was rebuffed and has not pursued its interest further, Nimmo highlighted the fact that shares in Chloride had done well anyway on the back of a "tremendously optimistic trading statement".

Highlighting such strong performances by his portfolio, Nimmo declared: "It is not doom and gloom."

However, he quickly qualified this by saying it "is certainly doom and gloom" in matters related to the UK consumer.

He estimated that about 60% of the companies in which the SLI Smaller Companies fund is invested do business outside the UK.

Nimmo said: "We are trying to invest in UK companies that have worldwide market positions."

On the general investment backdrop, Nimmo said: "We are just being quite cautious. We feel there is going to be a few more shocks in the next few months."

However, he does see some light at the end of the tunnel.

Nimmo said: "The turn will happen ... In a year's time, I think we will be on the way up. It could be quite rapid because markets do tend to anticipate turns (in the economy) well ahead of time - 12 to 18 months ahead of time."

However, seemingly keen not to get ahead of himself on this score, he added: "I am not sure what the catalyst will be. The turn might still be a few months off."

The Herald-Citywire survey focuses on open-ended funds aimed at retail investors, and ranks the performance of those working for investment houses with a significant presence in Scotland.

It does not cover managers of investment trusts or funds for which the minimum initial investment is more than £10,000.

Rankings are based on three-year, risk-adjusted performance against relevant benchmarks. Fewer than one-fifth of fund managers in the UK qualify for one of the 211 Citywire ratings.