A handful of funds including WS Lindsell Train UK Equity and Liontrust Special Situations have made consistent top-quartile returns for their long-term holders, research by Trustnet has found.
In this series, we are examining the rolling 10-year returns of funds in the IA UK All Companies sector, starting at the turn of the century; these were calculated on a quarterly basis, giving us 56 periods to review and, to focus on long-term performance, we only looked at the funds with a history of at least 15 years.
This identified six funds that have always been at the top of the peer group in the long-term periods we examined.
Rolling 10yr returns of fund vs sector
Source: FE Analytics
At the top of the table is IFSL Marlborough Special Situations as it’s the only fund in the sector that has a track record covering all 56 periods included in the research and was top quartile in each of them.
Run by Hargreave Hale’s Eustace Santa Barbara and Guy Feld, the £746m fund focuses on small- and medium-sized companies, which tend to be riskier investments but carry the potential for strong long-term growth. The fund tends to hold around 200 companies to reduce stock-specific risk; it starts with small positions in stocks that are then added to if they prove successful.
Analysts with FundCalibre said: “The Hargreave Hale team have a richly deserved reputation as astute stock pickers. The process, while perhaps not as clearly defined as some others, has held up well across a wide range of market conditions and the long-term track record of this fund is exemplary. We regard Hargreave Hale as one of the premier small-cap boutiques and this fund lives up to the billing.”
Over the entire period covered in this research (1 January 2000 to 30 September 2023), IFSL Marlborough Special Situations made a 1,042.2% total return compared with just 163% from its average IA UK All Companies peer. This means it is the best performing member of the sector since the turn of the century.
As mentioned, there are another five funds with top-quartile returns in every one of the 10-year periods in their track records. They can be seen in the table below, along with all the funds that are first quartile in more than 75% of the periods.
Source: FE Analytics
Slater Growth comes next but has a much shorter record than the previous fund. However, it has outperformed its average peer by a significant margin, making the sector’s highest return since its launch in 2005.
Despite its name, this is not an out-and-out growth fund. Instead, FE fundinfo Alpha Manager Mark Slater has a ‘growth at a reasonable price’ approach, looking for faster-growing companies but only buying them at a discount to the market.
The FE Investments team said: “Over the long term, performance has been impressive – this is largely attributed to good stock selection. The fund’s process is expected to result in a continued bias to small and medium-sized companies. As they are more susceptible to the health of the domestic economy, we would expect the fund to outperform when sentiment is positive and vice versa.”
Liontrust Special Situations is a well-known fund, managed by the FE fundinfo Alpha Manager duo of Anthony Cross and Julian Fosh along with Matthew Tonge and Victoria Stevens. The fund is run using Liontrust’s Economic Advantage process, which looks for companies with hard-to-replicate intangible assets such as intellectual property, infrastructure advantages or significant recurring business.
Square Mile Investment Consulting & Research said: “It is important to note that the fund tends to be structurally absent from certain sectors (such as materials and utilities), so performance should be expected to deviate from the index at times. Pleasingly for the current fund holders, this performance deviation has been impressively positive, with the fund having demonstrated impressive success in meeting its long-term performance objective.”
FTF Martin Currie UK Managers Focus is run by Martin Currie’s UK equity team, which has a strong track record. Its four managers – Joanne Rands, Richard Bullas, Ben Russon and Daniel Green – each contribute 25% of the ideas that go into the portfolio, drawn from best holdings of their individual UK equity funds.
WS Lindsell Train UK Equity is one of the best-known funds in the market and is run by Alpha Manager Nick Train, who runs a concentrated portfolio with very little turnover, buying what he sees as the best companies in the market and holding them for the long run.
Square Mile said: “We believe that it is worth highlighting here that the fund has successfully and consistently met its longterm performance objective and that we have conviction in the manager and his ability to continue to meet this over the long term.
“Nonetheless, we would stress that this strategy is probably best suited to investors that have little interest in the month to month and year to year performance of their investments, but instead seek attractive returns over very long time periods.”
The final fund to have made a top-quartile return in every one of the 10-year rolling periods we examined is ES R&M UK Recovery, managed by Hugh Sergeant.
Unlike many of the funds highlighted above, it is run with a value approach – making its appearance in this research more impressive as this style was out of favour for much of the recent past.