However, the reaction to the news that he will leave Invesco Perpetual after 25 years of loyal service to set up a new business certainly suggests that a lot of people believe he is that good.
We thought we would test that perception against the numbers and find out if Woodford and his other highly regarded peers are worthy of their star status.
There are two main balls to juggle when considering the performance of a fund: its returns, or growth, and its risk, or volatility.
We decided to analyse all of the 1,236 funds in the IMA universe and see which funds came out on top in both respects.
For funds to make the cut in this study, they need to have had the same manager for at least 10 years and beaten their sector and benchmark in at least seven of the last 10 calendar years. They also need to be a top-quartile performer over 10 years.
These were mandatory hurdles to jump, after which the funds had to have strong performance over five and three years. As these numbers represent a smaller period of time, we allowed a little more leeway.
The funds then had to be top-quartile performers in their sector for capital protection – measured using annualised volatility, maximum drawdown, downside risk and Sharpe ratio – over three, five and 10 years.
Downside risk measures the fund’s volatility in downmarkets, while maximum drawdown looks at the most investors could have lost if they bought and sold at the worst possible moments.
The Sharpe ratio measures what returns the managers have generated per notional unit of risk.
Although there are some sectors where no funds have even come close to the feat – for instance there are no pure fixed income funds on the list – a number of portfolios have passed the test with flying colours.
UK Equity Income
Invesco Perpetual High Income
Woodford is deserving of his star manager status, according to our research, with his £13.8bn Invesco Perpetual High Income fund one of only three to pass every test.
With returns of 202.19 per cent, the five crown-rated fund is one of the best performers in the very popular IMA UK Equity Income sector over 10 years.
The fund registered top-quartile returns in 2004, 2005, 2006, 2007, 2008 and 2011. It has tended to lag behind its peers in strongly rising markets and because of that was a bottom-quartile performer in the rebound years of 2009 and 2010, and as markets rallied in 2012.
However, it has been the most resilient in the sector when things have turned sour.
It was the fourth-best performing fund in 2008, losing 19 per cent compared with the sector's losses of close to 30 per cent. It was also the best-performing fund in 2011 as the eurozone crisis exploded onto the scene.
Performance of fund vs sector over 10yrs
Source: FE Analytics
On top of that, Woodford also has a knack of protecting his investors' capital: the fund has the highest Sharpe ratio over the last decade, for instance.
For anyone who is invested in the fund and is concerned about what to do now that Woodford is leaving, they can take solace in the fact that FE Alpha Manager Mark Barnett’s Invesco Perpetual UK Strategic Income fund was a close contender; the only thing that stopped him qualifying for the list was the fact he has been running it for less than 10 years.
UK Growth
AXA Framlington UK Select UK Opportunities
In the highly competitive IMA UK All Companies sector, which has 179 funds with a 10-year track record, FE Alpha Manager Nigel Thomas’s AXA Framlington UK Selected UK Opportunities is the standout performer.
Although the £4.2bn fund has never been higher than 12th in the sector for returns in any of the last 10 calendar years, it is its consistency that is unique.
Our data shows that it has been a first or second quartile performer in every calendar year over the last decade, except for 2012, when it returned 10.59 per cent against the FTSE All Share’s 12.3 per cent and the IMA UK All Companies sector’s 15.05 per cent.
It is also up against the index and the sector year to date.
Because of that, the fund sits firmly in the top quartile over 10 years, with returns of 204.62 per cent, beating its benchmark by close to 75 percentage points.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund ticks all the capital protection boxes, except for the fact it sits in the third quartile for volatility over three years.
Alastair Mundy’s Investec Special Situations fund is also worth mentioning, as it was a close second behind the AXA Framlington fund.
It has been able to deliver consistently high returns and protect against the downside, but lost out to Thomas due to three poor years in 2005, 2007 and 2010.
Europe
Jupiter European
The eurozone crisis could still be the biggest headwind facing the market, but FE Alpha Manager Alexander Darwall’s bottom-up stockpicking approach means the performance of his five crown-rated £2.2bn Jupiter European fund is unrivalled.
Darwall took over the fund in January 2001 and his investors have been well-rewarded ever since.
The fund is a top-quartile performer in the IMA Europe ex UK sector in six of the last 10 years, a feat that is unmatched by any of its competitors. These include the turbulent years of 2008 and 2011.
This means Darwall’s fund is the fourth-best performer in the sector over 10 years, with returns of 239.03 per cent, comfortably beating its benchmark – the FTSE World Europe ex UK index – which is up 150.43 per cent.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund also sits in the top quartile over five years.
Not only has it been one of the best performers for high, consistent returns, but no other fund in the sector can match Jupiter European’s capital preservation record either, having been a top quartile performer on all four metrics over three, five and 10 years.
Emerging markets
Aberdeen Emerging Markets
First State and Aberdeen are widely regarded as the two best fund groups for emerging market equities; however, it is the latter’s flagship offering that came out on top in this study.
The five crown-rated Aberdeen Emerging Markets fund has dominated the sector in terms of both capital growth and capital protection in this highly volatile sector.
The £3bn fund is a top-quartile performer in the IMA Global Emerging Markets sector over five years and has the highest returns – 379.44 per cent – over the decade.
Those returns are not only down to one or two strong years. The fund is a top-quartile performer in seven out of the last 10 calendar years and the only time it underperformed against the sector and its benchmark was in 2007.
The fund’s ability to shield investors during the last few years is also noteworthy.
Although sentiment towards emerging markets has been largely negative over the last three years, the fund has returned 7.76 per cent while the MSCI Emerging Markets index has lost 0.33 per cent. It has had the sixth best maximum drawdown score in the sector over that time as well.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
The five crown-rated First State Asia Pacific fund almost pipped Aberdeen to the post, having been the best performer in the IMA Asia Pacific ex Japan sector.
The fund, which is headed up by FE Alpha Managers Angus Tulloch and David Gait, scored well in terms of its ability to protect its investors' capital, though its consistent relative performance has not been as high as the Aberdeen Emerging Markets fund.
Unfortunately both funds are now soft-closed, although they are available on some fund platforms.
Mixed asset
Jupiter Merlin Balanced
Funds of funds often come under harsh criticism from fee-obsessed investors, and usually for good reason. However, the £1.5bn Jupiter Merlin Balanced fund is one that seems to justify its 2.41 per cent ongoing charges.
The portfolio, which is headed up by John Chatfeild-Roberts, Algy Smith-Maxwell and Peter Lawery (all of whom are FE Alpha Managers) is a top-quartile performer in the IMA Mixed Investment 40%-85% Shares sector in six of the last 10 years.
It has not fallen into the bottom quartile in any of the last 10.
It has returned 128.85 per cent over the last decade, 40.45 percentage points more than the average fund in the sector.
Performance of fund vs sector over 10yrs
Source: FE Analytics
The fund’s capital protection metrics are the main reason it features on the list, however.
Jupiter Merlin Balanced sits in the top quartile for volatility, maximum drawdown and downside risk over three, five and 10 years. No other fund in any of the three mixed investment sectors or IMA Flexible Investment sector that achieved the returns objective managed this.
The fund also has a top-quartile Sharpe ratio over five and 10 years. Its one failing is that it is only a second-quartile performer for its Sharpe ratio over three years.
