A handful of UK equity funds have so far struggled to deliver top quartile performance during 2018 despite having established strong track records for the previous five-year period, FE Trustnet research shows.
According to our research, 42 per cent of IA UK Smaller Companies funds that were in the top quartile for the five years to the end of 2017 have found themselves in the bottom quartile during 2018.
Things look better in the IA UK All Companies sector, where just 20 per cent of the long-term performers are bottom quartile today, and just 32 per cent of top quartile performers of those in the UK Equity Income are behind their peers so far.
For this article, we filtered the entire Investment Association universe to find out which UK equity funds are in their sector’s bottom quartile during the first five months of 2018 but were top quartile during the five years to end-2017.
In the following article, we look at the long-term top performing funds in the IA UK Smaller Companies, IA UK All Companies and IA UK Equity Income sectors that have had a tougher start to the year than their peers.
However, it is worth bearing in mind that there are still seven months of the year remaining and some may yet turn the tables. 
Source: FE Analytics
As the above chart shows, during the first five months of 2018, 11 previously top-performing UK equity funds have lost investors’ money.
The Neptune UK Mid Cap fund – managed by FE Alpha Manager Mark Martin – is the worst performer, with a 3.47 per cent loss for the year to 31 May 2018.
Over the five years to end-2017, though, the fund delivered a 94.69 per cent total return compared with a 93.07 per cent gain for the FTSE 250 ex IT index, a performance that has made the strategy top quartile over that period.
The £488.6m fund, which invests in a portfolio smaller- and medium-sized companies in the FTSE 250 and FTSE Small Cap indices, targets capital growth and has been overseen by Martin since 2008.
Two income funds follow Neptune UK Mid Cap, with a 2.95 and a 2.34 per cent loss respectively: Unicorn UK Income and Premier Optimum Income. In all, five previously top-performing equity income funds have made a loss this year.
Another fund with negative numbers is James Thorne’s Threadneedle UK Smaller Companies fund, which is down by 1.85 per cent compared with a 4.22 per cent gain for the IA UK Smaller Companies sector during the first five months of 2018.
The four FE Crown-rated fund had strong performance figures over the five-year period prior to 2018, delivering a 155.25 per cent total return compared with a 112.96 per cent gain for the sector average.
Two more UK equity income funds from Premier Asset Management also make the list. Premier Monthly Income and Premier Income have registered losses of 1.50 and 1.47 per cent respectively.
Another fund struggling in 2018 is R&M UK Dynamic Equity from the IA UK All Companies sector, which has been managed by William Lough since March and is down by 1.09 per cent in 2018.
Despite being top quartile since 2013 and making it onto our list of UK funds beating their peers’ risk-adjusted returns over the prior five-year period, the four FE Crown-rated fund has fallen by 1.85 per cent this year.
Performance of funds until end of May
Source: FE Analytics
We were also left with some big top-performing funds over five years struggling in 2018 found in each of the IA sectors including the £1.6bn Marlborough Multi Cap Income and the £1.4bn Old Mutual UK Smaller Companies funds.
FE Alpha Manager Siddarth Chand Lall oversees Marlborough Multi Cap Income, a fund that seeks to generate an attractive and growing level of dividend income in addition to long-term capital growth.
Old Mutual UK Smaller Companies, meanwhile, has been run by FE Alpha Manager Daniel Nickols since 2004 and has been top quartile over three and five years.
Although it has had a weak start to 2018, delivering a 1.75 per cent total return compared with a 4.22 per cent gain for the average IA UK Smaller Companies fund, over the prior five-year period Old Mutual UK Smaller Companies has delivered a 160.14 per cent total return compared with a 112.96 gain for the average sector fund.
Another big name on our list is the £1.3bn Standard Life Investments UK Equity Income Unconstrained fund, overseen by Thomas Moore. Despite having a weak start to 2018 with a 0.26 per cent total return, the fund has delivered a gain of 89.30 per cent versus a 66.20 per cent gain for the average IA UK Equity Income fund over the five years to end-2017.
The second largest UK smaller companies fund on our list with a total of £699.9m of assets under management is Schroder UK Smaller Companies.
The fund has been run by FE Alpha Manager Andrew Brough since 1994 and has been top quartile from 2012 until 2017, delivering a 145.48 per cent total return.
But with a 1.01 per cent gain so far in 2018, it is behind the IA UK Smaller Companies sector average’s 4.22 per cent gain.
Among those having posted the highest returns over the five-year period we find Old Mutual UK Smaller Companies Focus – a separate strategy overseen by Nick Williamson.
Performance of fund until end of May
Source: FE Analytics
The five FE Crown-rated fund has delivered a 226.57 per cent total return, doubling the average IA UK Smaller Companies sector peer’s 112.96 per cent gain for the period.