Building a superior fund isn’t a guarantee that investors will come flocking. This fund’s diversified, lower-risk strategy has gone unappreciated, despite a solid track record and a management team willing to eat its own cooking. Investors seeking to add alpha to their portfolio should take note.–The Editors

Aston/TAMRO Diversified Equity (ATLVX) has built an impressive track record over the past decade. The fund returned 5.9 percent over that period and ranked in the top 5 percent of large-growth funds, according to Morningstar data.

That success stems from the disciplined investment process and philosophy of Philip Tasho, CEO of TAMRO Capital Partners, who has helmed the fund since its inception in 2000. In March 2010, Tasho was joined by co-manager Tim Holland, a five-year veteran of the firm.

The duo seeks to invest in time-tested companies with solid growth prospects and a sustainable competitive advantage. Tasho believes superior companies possess three important traits.

“The first is differentiated product or service offerings in which the company has a leading market share and a sustainable competitive advantage,” Tasho said. He added that he looks for companies with a management team that’s stuck together through thick and thin and have allocated capital wisely. Although many companies may fit this description, Tasho and Holland will only establish a position when the stock’s upside potential is three times greater than the downside risk.

That valuation-sensitive approach makes it tough to pigeonhole Aston/TAMRO Diversified Equity into any one style box; Morningstar has reclassified the fund three times in the past decade. As a result, the fund has struggled to attract and retain institutional investors. The fund’s asset base has fluctuated from about $10 million early last decade, to a high of $145 million in 2006, to its current $20 million.

The fund’s diminutive asset base, combined with the firm’s relatively modest asset base of about $1.5 billion, makes economies of scale difficult to realize. Consequently, Aston/TAMRO Diversified Equity’s expense ratio runs slightly high at 1.2 percent. However, Holland said the firm will pass on cost savings to investors as the fund grows.

Insider ownership levels indicate that management is working in the interest of shareholders; Tasho has invested $1 million in the fund, and Holland is reported to have invested between $100,000 and $500,000 in the fund.

The portfolio currently reflects three compelling investment themes: changing fundamentals in the energy space, growing agricultural demand and a shift in the technology space to favor cloud computing.

Tasho and Holland have adopted a bold strategy for playing the energy sector. The duo believes the best energy opportunities lay in North American natural gas assets. Management believes natural gas will gradually transition to a globally priced commodity. This means that the gap between the low price paid in the US and the higher price commanded in Europe will gradually close.

Range Resources (NYSE: RRC) is the portfolio’s largest single position at just over 3 percent of assets. The firm boasts a huge reserve base and the lowest finding costs of any industry player at 71 cents per million cubic feet. This allows Range Resources to turn a profit even with natural gas prices at depressed levels. The firm is planning to reduce its finding costs to 65 cents by selling off some its higher priced reserves, greatly enhancing profitability.