This means good decisions are not diluted, but a wrong call will have a bigger impact on the portfolio.Managers of focused funds tend not to be slaves to stock market indexes. Often, mainstream UK Growth fund managers will have to pay attention to the FTSE All Share and hold some of the larger companies such as BP, Vodafone and HSBC, even if negative on their prospects.The concept of aggressive funds seems to work well. In many cases they have outperformed the more diversified mainstream portfolio offered by the same provider (see table). Focused funds are available for other geographic regionsDWS has launched an equity income-focused fund called DWS Equity Income Plus, and in the same sector Credit Suisse offers a similar product called UK Alpha Income. The managers of these funds are looking for dividends, but the concept of a concentrated portfolio remains the same.Juliet Schooling, an independent financial adviser at Chelsea Financial Services, says: “These funds set the scene for better returns.

If a manager is holding only 30 or 40 stocks, they can watch them like a hawk. It is far more difficult to pay the same level of attention to a more diversified portfolio.”But focused funds should form part of a diversified portfolio, rather than be a core holding. The concentrated nature of these funds means that if a manager does make a wrong call on a stock, this will have a bigger impact on performance. So performance of focused funds is likely to be volatile.Among focused funds Ms Schooling recommends are Gartmore UK Focus, Isis UK Prime, Unicorn Free Spirit and Schroder UK Alpha Plus. Richard Buxton has managed the £117m UK Alpha since its launched a year ago July and also manages the Schroder UK Growth investment trust, a mainstream portfolio.Of the UK Alpha fund, Mr Buxton says: “It’s about making lots of quick wins, taking a profit and moving on.” Mr Buxton takes risks in his concentrated portfolio of 30 companies. Unlike many competitor funds, UK Alpha Plus has no resemblance to the UK stock market.

Mr Buxton does not hold BP or Vodafone in this, although they are important constituents of the FTSE All Share index.He is also prepared to avoid the big sectors of the All Share if he is negative about their prospects. He holds no exposure to the oil sector, despite this representing almost 14 per cent of the index. Mr Buxton, 39, joined Brown Shipley Asset Management in 1985 with an English degree from Oxford. He moved to Schroder in 2001 after 10 years at Baring Asset Management.He will consider a stock attractive for Alpha Plus only if he can see it has 10 to 20 per cent upside. Last September, he bought Astra Zeneca at £18, and sold three weeks later at £23. But some stocks have been held over the life of the fund, including Royal Bank of Scotland, HSBC, ICap and Rio Tinto.Mr Buxton’s broader portfolio is the UK Growth investment trust.

“It takes fewer risks and it is targeted at the medium-risk investor. It holds 50 companies and aims to outperform the FTSE All Share index by 2 per cent after charges, leading to much tighter stock and sector risk controls against this index.” His portfolio cannot hold more than 3 per cent above its respective weighting in the All Share.Performance of focused funds depends heavily on manager skills, so providers are introducing performance fees on this breed of fund. Most unit trusts charge a flat rate, generally 1.5 per cent a year, whether they perform brilliantly or poorly. But with performance fees you pay less if the fund performs poorly.