Five-year track records now look at a lot different to this time last year as they cover more market conditions: you have the year the recovery started to falter in 2010, the falling market of 2011, the surging markets of 2012 and 2013 and the much more difficult and volatile year of 2014.
Given those varying market backdrops, it isn’t too surprising that only a select number of IA UK All Companies, UK Smaller Companies and UK Equity Income funds have managed to beat their benchmarks and respective sectors in each of the last five full calendar years.
However, in this article and with the help of FE data, we reveal the six funds – out of a possible 374 –that have achieved that feat.
We start with the IA UK All Companies sector – which is the largest of the three both in terms of AUM and number of funds. There has been only two portfolios which have turned in top quartile returns and have beaten the FTSE All Share in each of the last five years: CF Lindsell Train UK Equity and Aviva UK Equity Manager of Manager.
Source: FE Analytics
The consistency of FE Alpha Manager Nick Train’s five crown-rated CF Lindsell Train UK Equity fund has been staggering.
According to FE Analytics, not only has the £1.3bn fund been a top quartile performer in each year between 2010 and 2014, it was top quartile in 2009 and 2008 as well as beating the sector in 2007. Apart from 2007, it has beaten the index in every full calendar year since its launch in July 2006.
Since inception, Train’s fund has been the seventh best performing portfolio in the sector and has beaten the index by more than 100 percentage points with returns of 164.64 per cent.
On top of that, it has been top decile for its maximum drawdown, which measures how much an investor would lose if they bought and sold at the worst possible time, and its Sharpe ratio, which measures risk-adjusted returns over that time.
CF Lindsell UK Equity is a highly concentrated/benchmark agnostic portfolio of just 26 stocks – the top 10 holdings account for 71 per cent of the fund’s assets – and Train keep his turnover to the bare minimum.
He tends to focus on market leading companies which have recognisable brands and the ability to grow over the long term. Therefore he has big bets on the likes of consumer goods company Unilever and drinks giant Diageo.
Aviva UK Equity Manager of Manager maybe isn’t as well-known as CF Lindsell Train UK Equity, but has also been a very consistent outperformer and is partly managed by Train as well.
Not only has the fund – which was launched in May 2005 – been top quartile in each of the last five years, it has only underperformed against the sector in two calendar years since it was opened.
Aviva UK Equity Manager of Manager is a collection of four segregated mandates – which are run by Baillie Gifford, Investec, Standard Life and Lindsell Train – with each group investing in their best ideas. Like Train’s fund, it too is a concentrated portfolio with its top 10 accounting for 60 per cent of its assets.
There are a number of other funds in the IA UK All Companies sector which have outperformed the sector average in each of the past five calendar years – such as GVO UK Focus, Jupiter UK Alpha, Neptune UK Mid Cap and F&C UK Mid Cap – but have failed to consistently beat their benchmarks.
F&C UK Mid Cap has been a top quartile performer in each of those years, but underperformed against its FTSE 250 benchmark in 2012 and 2013. It is a similar story with the Neptune offering, which underperformed against the mid cap index in 2010 and 2013.
The GVO UK Focus and Jupiter UK Alpha funds, on the other hand, both underperformed their FTSE All Share benchmarks in the falling market of 2011.
FE Alpha Manager Alex Wright’s five crown-rated Fidelity UK Smaller Companies fund is the only portfolio in the 53-strong IA UK Smaller Companies sector to beat its peers and its benchmark in each of the last five calendar years.
While the fund was second quartile last year and in 2011, it was has been top quartile in every other year since its launch in February 2008 thanks to the manager’s well-established value/contrarian style.
It means that, since inception, the £250m fund has topped the sector with returns of 247.61 per cent, beating its Numis Smaller Companies ex IT index by close to 150 percentage points in the process.
Performance of fund versus sector and index since Feb 2008
Source: FE Analytics
Unfortunately for new investors, the fund was soft-closed in 2013.
Turning to the IA UK Equity Income sector, there have been three funds that have beaten the sector and the FTSE All Share on a consistent basis over the last five years – Royal London UK Equity Income, Threadneedle UK Equity Income and Threadneedle UK Equity Alpha Income – though none have them have been top quartile in each of those years.
Source: FE Analytics
FE Trustnet has highlighted the consistency of Martin Cholwill’s five crown-rated Royal London UK Equity Income fund in the past. The only year over the past five when it wasn’t top quartile was in 2011, when its loss of 1.86 per cent ranked it 34 out of 77.
Nevertheless, the now £1.6bn fund, which is effectively a FTSE 350 portfolio, has outperformed the sector in every full calendar year since the manager took charge in March 2005. While it was third quartile in the crash year of 2008, its losses of 28.18 were slightly less than those of the sector average.
The fund has also beaten the FTSE All Share in each of those years, except in 2007 when the index was up 5 per cent while the fund returned 0.8 per cent.
Royal London UK Equity Income has a yield of 3.62 per cent and Cholwill counts mega-caps such as HSBC and GlaxoSmithKline, as well as less widely held stocks such as Investec and United Utilities Group, as top 10 holdings.
The two Threadneedle funds are both headed up by Richard Colwell and FE Alpha Manager Leigh Harrison and have five FE Crowns.
The UK Equity Alpha Income fund, which is the more concentrated version and has a significantly smaller AUM at £860m compared to the UK Equity Income fund’s £3.3bn, has delivered the highest return out of the two over a cumulative five-year period with gains of 88 per cent.
It has also had more top quartile years over the last half a decade, 2011, 2012, 2013 and 2014, while Threadneedle UK Equity Income has been a top quartile performer in only two of the last five full calendar years: the difficult markets of 2014 and 2011.