The Investment Association s best performing fund group over the last decade

Transcription

1 The Investment Association s best performing fund group over the last decade In this battle of the major fund groups, FE Trustnet highlights which have the highest proportion of outperforming funds over the past 10 years. Investors are always striving to find the best active funds out there, and FE try to help that search with our various ratings such as FE Alpha Manager, FE Crowns and FE Risk scores. However, as collective organisations, which have been the best fund groups at adding value for their clients? Of course, that is a very difficult question to answer as many groups will only focus on a particular area of the market or are trying to generate a different outcome to many of their peers. However, to try and shine some light on the issue, FE Trustnet has pulled together some research looking at which groups have had the highest proportion of outperforming active funds over the past 10 years which is now a very interesting time horizon as it incorporates a variety of market conditions. To whittle down the list, we only included groups which have at least 15 active funds with a decadelong track record leaving us with 23 fund houses. We also put together a strict methodology to work out which funds have actually outperformed. Every active equity fund was measured against its benchmark and if they didn t have a stated benchmark, we used the most relevant index. For example, if they sit in the UK all-cap space, they were measured against the FTSE All Share, if they are a predominantly large-cap US fund they were compared against the S&P 500 and if they are IA Japan funds, they were measured against the Topix. All other funds without stated benchmarks were measured against their relevant MSCI indices. Bond funds were also measured against their stated benchmarks, but in the absence of an index, they were compared against their IA sector average. If funds sit in the four IA multi asset sectors, they were measured against the peer group average. Therefore, any fund which sits in the IA Specialist and IA Unclassified sectors that don t have a benchmark or an easily comparable index were removed from the study. On top of that, all IA Targeted Absolute Return and direct commercial property funds were removed from the list. It goes without saying that, unfortunately, the study has survivorship bias as we can only include funds that still exist today. Anyway, that s enough of the methodology so which group has been the best?

2 Best performing fund groups of the past 10yrs As the table above shows, it has been Columbia Threadneedle which has come out on top as a hefty per cent of its funds with a long enough track record are outperforming over 10 years. The fact that Columbia Threadneedle has 42 funds with a 10 year track record makes the feat even more impressive as it has the second largest number of funds in the study behind Schroders. The group is home to four FE Alpha Managers (Mark Heslop, Leigh Harrison, David Dudding and Philip Dicken) and the funds included in this study have an average FE Crown rating of Columbia Threadneedle s area of strength has clearly been its equity teams as out of the nine of their funds that have underperformed over the past 10 years, seven of them focus on fixed income the other two being Threadneedle Japan and Threadneedle Latin American. Investors will probably know the group best for their European and UK equity funds, and that is certainly where you have found some of the best relative performers. For example, their European Smaller Companies fund is the IA European Smaller Companies sector s best performer over 10 years while David Dudding s 2.9bn European Select fund is outperforming over one, three, five and 10 years after beating its FTSE World Europe ex UK benchmark in six of the last seven calendar years.

3 Performance of fund versus sector and index over 10yrs It s a similar story with their UK funds, as Leigh Harrison and his team have 11 funds which are beating their respective FTSE benchmarks, six of which are top-quartile in their sectors. While most will focus on their respected UK equity income funds, one that s worthy of a mention is Mark Westwood s 205m Threadneedle UK Select which is top-quartile in the UK All Companies sector over one, three, five and 10 years after beating the FTSE All Share in seven of the last 10 calendar years. Columbia Threadneedle also has three US funds which are outperforming the notoriously difficultto-beat North American market over 10 years. Mark Burgess, chief investment officer at Columbia Threadneedle, says that the group s very active and team-based approach has been the secret to its success a strategy which will remain vitally important over the coming years. We fundamentally believe that markets are inefficient and an active approach can benefit investors over the long-term both in terms of risk and return, and our track record attests to this, Burgess said. We are now arguably in the most challenging macro and market backdrop since the onset of the global financial crisis. In a low-growth, low-return world a truly active approach will be required to search out the opportunities that will generate strong future performance. He added: I am proud of the long-term performance of the team and our continued commitment to delivering for our clients. Second on the list is Jupiter, as 75 per cent of its funds are outperforming on a 10-year view.

4 The group has 24 funds with a long enough track record, meaning only six of their offerings (Corporate Bond, Ecology, Fund of Investment Trusts, Income Trust, Merlin Worldwide Portfolio and Emerging European Opportunities) are down against their benchmarks in this study. The group s multi asset offerings have been the major driver of its total outperformance over the past decade, with three of FE Alpha Managers John Chatfeild-Roberts and Algy Smith-Maxwell s Jupiter Merlin outperforming. There is also their Distribution fund, which has gone under the radar of most investors. It is 587m in size, headed up by Rhys Petheram and Alastair Gunn and aims to provide a sustainable level of income and the prospect of capital growth over the long-term. While the current duo has only been in charge since 2010, it is a top-quartile performer in the IA Mixed Investment 0%-35% Shares sector over one, three, five and 10 years having outperformed eight of the last 10 calendar years. Performance of fund versus sector over 10yrs While Jupiter Distribution has had a higher maximum drawdown than its average peer over 10 years, it has had top-quartile risk-adjusted returns (as measured by its Sharpe ratio). A recent FE Trustnet study recently highlighted that Jupiter Distribution has been among the top 10 multi-asset income dividend payers over the past five years. As with Columbia Threadneedle, Jupiter s European and UK equity desks have performed well.

5 For example, FE Alpha Manager Alexander Darwall continues to cement his position as one of the best European managers in the business, with his 3.2bn fund sitting in the sector s top decile for its total returns, risk adjusted returns and annualised volatility over the past decade. Sitting in third is Invesco Perpetual, with per cent of its funds outperforming over the last 10 years. For the study, though, we included each fund group within a total organisation. Therefore, in terms of Invesco Perpetual, the offshore domiciled Invesco Global Asset Management funds were also included. Those funds have severely hurt the group s total numbers, as four of the six that have a long enough track record have underperformed. If we were to exclude those from the study, Henley-based Invesco Perpetual arm would have sat at the top of the pile as only six out of their 29 portfolios have failed to beat their benchmark meaning the group has an outperformance rate of per cent over the period in question. The group has again proved that there is more to Invesco Perpetual than Neil Woodford, as not only have all their highly-rated UK equity income and corporate bond funds outperformed, but so have the likes of their Asian, Global Equity and UK Smaller Companies funds. It therefore comes as little surprise that the group s fettered funds of funds Invesco Perpetual Managed Growth and Invesco Perpetual Managed Income are both outperforming their respective IA sectors over one, three, five and 10 years.

6 The rest of the top-performing groups over the past decade include L&G (which although is predominantly known for its passive offerings, has had an active outperformance rate of per cent), Schroder (which has performed so well in this study largely as a result of its ex-cazenove funds) and Baillie Gifford. Sitting at the bottom of the pile, however, is HSBC as just per cent of their 18 funds have outperformed over the past decade. Just slightly above HSBC is Goldman Sachs Asset Management, as only two of its 16 funds (12.5 per cent) are outperforming in this study.