Research house Lonsec has retained its “highly recommended” rating on the Hyperion Australian Growth Companies Fund for the third consecutive year.

In its report, Lonsec notes that the fund returned an excess return of 1.92 per cent and 2.9 per cent over the five- and seven-year periods to June 2012, outperforming the Lonsec peer average in both instances.

Lonsec says the fund’s performance in both rising and falling markets was an impressive result for a growth style manager and reflects a strong research process.

“Our focus has always been to generate high alpha investment returns based on a bottom-up investment process which identifies quality companies,” said Tim Samway, Hyperion managing director.

The fund is highly concentrated on between 20 to 30 stocks with low turnover.

Criteria ensure that the fund is dominated by companies that own high quality business franchises with above-average growth potential.

The companies all have low levels of gearing with predictable medium to long-term earning streams.