Baillie Gifford, Investec and Premier are the larger asset management houses that have the most open-ended funds sitting in the top quartile of their respective sectors over the long term, research by FE Trustnet shows.
Investors are often told to tune out short-term noise and focus on the long run so with this in mind we have reviewed the Investment Association universe to find out which groups have the most funds outperforming their average peer over the past decade.
To do this, we ran the total returns of every fund in the universe over the 10 years to the end of 2017, ranked them by quartile (where appropriate to do so, meaning absolute return, unclassified and specialist funds are among those excluded), organised them by management group and determined what share of each group’s range was in the top quartile.
In this article, we will focus on groups with 10 or more eligible funds; those with fewer than 10 will be looked at in a later article.
Performance of fund vs sector over 10yrs
Source: FE Analytics
At the very top of the table is Baillie Gifford, which has 16 funds included in this research. Some 11 of them – or 68.8 per cent – are in the top quartile in the decade to the end of 2017, with another four in the second quartile. The remaining fund has posted third-quartile returns.
The Edinburgh-based company is focused on long-term investment. Explaining its investment philosophy, the firm said: “Baillie Gifford are long-term investors, not speculators. Our investment philosophy focuses on growth while our universe is global.
“Our rigorous process of fundamental analysis and proprietary research, combined with a depth of expertise, are core to a successful, long-term, bottom-up investment approach. This allows us to exploit global opportunities over periods of, typically, five years or more. It’s a philosophy that has guided our investment strategy for 109 years, so no one can say we don’t practice what we preach.”
The above chart shows the firm’s top-quartile fund with the highest 10-year return. FE Alpha Manager Douglas Brodie’s £393.9m Baillie Gifford Global Discovery fund has made 298.53 per cent over the decade in question, making it the IA Global sector’s highest returner.
The five FE Crown-rated fund invests in global smaller companies, although its focus prior to Brodie taking over in May 2011 was European small-caps. The FE Invest team, which has the fund on its Approved List, said Baillie Gifford’s long-term philosophy is a “valuable trait” when it comes to small-cap investing.
Other Baillie Gifford strategies in their respective sectors’ top quartile on a 10-year view include the £3.1bn Baillie Gifford Managed, £2.5bn Baillie Gifford Japanese and £1.1bn Baillie Gifford American funds.
The table below shows all the large asset management houses that have more than 25 per cent of their eligible funds posting top-quartile returns over the 10 years to the end of 2017. As can be seen, Baillie Gifford is in the lead by a significant margin.
Investec comes in second place after seven of its 14 funds made top-quartile 10-year returns, while 85.7 per cent of its line-up is in first or second quartile. The firm has an active bottom-up strategy called 4Factor that ranks companies by four investment criteria – quality, value, earnings and technicals – to identify potential ideas before its analysts carry out fundamental research.
Over the past decade, the fund’s highest returning top-quartile fund has been Investec UK Smaller Companies with its 289.33 per cent gain (it’s ranked seventh in the IA UK Smaller Companies sector, where the average member made 179.02 per cent). However, it must be noted that current manager Matt Evans only took over the portfolio in October 2017.
Other Investec funds in the top quartile over 10 years include Investec Cautious Managed, Investec UK Alpha and Investec UK Special Situations.
Source: FE Analytics
In third place is Premier Asset Management. Like Investec, half of its 12 funds are in the top quartile over 10 years but 75 per cent of its strategies are either the first or second quartile. The group has a wide range of a range of UK equity, global equity, multi-asset, absolute return and fixed income funds but has a particular focus on multi-asset and income investment management.
The best performer from this fund group was Chris Wright’s £165.8m Premier Ethical fund, which was 138.24 per cent – compared with an average gain of just 87.66 per cent from the IA UK All Companies peer group. The fund has an ethical screen which demands it avoids companies in areas such as tobacco and weapons of mass destruction but seeks out those that are improving their ethical behaviour or promoting ethical causes.
Premier Multi-Asset Growth & Income, Premier Income and Premier Monthly Income are some of the other funds managed by the group that appear in their respective sectors’ top quartile over the decade to the end of 2017.
The research also shows that some of the best-known household names in the industry have a decent share of their funds in the top quartile over 10 years.
Schroders’ unit trust business appears in fourth place with 45 per cent in the first quartile, while 43.8 per cent of Invesco Perpetual’s funds also made the cut and 39 per cent of Fidelity International’s offerings are at the top of their peer group.
But the picture with the three largest fund groups in the UK industry is a little more lacklustre.
M&G is the fund house with the most assets under management but it has slightly underperformed in this research. Eight of the firm’s 36 eligible funds – or 22.2 per cent – are top quartile over the past decade and it is ranked 21st out of 41 fund groups because of this; it has nine funds in the bottom quartile.
Scottish Widows Unit Trusts Managers is the second largest fund group but it is in 39th place in this study. One of the group’s 25 funds (or 4 per cent of its range) has posted top-quartile total returns for the decade to the end of 2017. That fund was Scottish Widows Multi-Manager International Equity.
The third biggest fund group – BlackRock – came in 22nd place. Just under 22 per cent of the group’s 23 eligible funds have made a top-quartile gain, among them BlackRock European Dynamic, BlackRock Continental European and BlackRock UK Special Situations.