Nightmarish conditions since the 2008 financial crisis have pushed many of the UK’s best-known funds out of the top quartile of their sector, but over the last year many have found a new lease of life.
Here are five of them:
UK All Companies
Fidelity Special Situations
Fidelity’s flagship £2.4bn Special Situations fund has been under pressure for its lagging performance over three years, having delivered disappointing bottom-quartile returns.
The fund may soon silence its doubters, however, having returned to the top quartile over one year, delivering 13.16 per cent, compared with a sector average of 8.54 per cent.
The fund has a stellar long-term track record, returning 160.79 per cent over 10 years, while the IMA UK All Companies sector has made 113.94 per cent.
Performance of fund vs sector and benchmark over 1-yr
Source: FE Analytics
Rob Morgan, analyst at Hargreaves Lansdown, says his firm took the fund off the Wealth 150 list when
Sanjeev Shah took over from
Anthony Bolton, but has since put it back on because the new manager is starting to prove himself.
"Shah had a tough period and then a good period and then another tough period," he explained.
"It is run like a special situations fund, in forgotten about, undervalued companies. That type of contrarian process takes time."
"He’s done a reasonably good job in difficult markets. When the background is more variable, it will do really, really well, as we’ve seen so far this year."
JOHCM UK Growth
Stagnant growth in the global economy has taken its toll on the £225.7m JOHCM UK Growth fund over the past three years, driving it into the bottom quartile in spite of strong performance over the longer term.
The fund has come back sharply over one year, returning 18.11 per cent over the period, compared with a sector average of 8.53 per cent.
The Dublin-domiciled portfolio, managed by Mark Costar and Alex Savvides, is heavily weighted toward financials, which have experienced a rally on the back of more decisive monetary and political action in developed economies.
The fund counts blue chip names such as BP, Royal Dutch Shell and HSBC among its top-10 holdings, as well as cruise company Carnival and UK-based car rental firm Northgate.
Morgan says the fund is another example of a portfolio that needs "fair winds behind it" in order to be top of the pack.
He adds that Savvides, who also runs JO Hambro’s UK Dynamic fund, is a young manager he is keeping an eye on.
UK Equity Income
Schroder Income
After disappointing three-year returns, the £1.1bn Schroder Income fund has moved back into the top-quartile of its IMA UK Equity Income sector over one year.
The fund, headed up by Nick Kirrage and Kevin Murphy, has delivered bottom-quartile returns of
20.45 per cent over three years, but it has a solid long-term track record and has surged back to the top of the charts over the short-term, returning 14.02 per cent over one year, while the sector has returned an average of 9.12 per cent.
Performance of fund vs sector and benchmark over 1-yr
Source: FE Analytics
Morgan says the fund is a more cautious contrarian play, investing in out-of-favour companies and betting on a turnaround.
"If you get enough of those that survive and turn around, you end up with decent returns," he commented. "That didn’t work at all last year, but has worked really well this year."
Schroder Income Maximiser
The £778.1m Schroder Income Maximiser fund's three-year performance puts it in the bottom quartile of its sector, although it is a top-quartile performer over one year.
The portfolio, managed by Thomas See, is currently yielding 6.7 per cent and tops the total return table over one year, bringing in 13.46 per cent.
Morgan says it is unusual for the fund to have performed so well in up markets because it takes covered bets, which sacrifice capital returns for income.
"They have some strong stocks in the portfolio because covered bets would normally be a drag," he explained.
Global
FF Global Financial Services
The three crown-rated FF Global Financial Services fund languishes at the bottom of the IMA Global sector over three, five and 10 years.
However, the €222m portfolio, managed by Sotiris Boutsis, has rallied over the short-term. It has returned 11.06 per cent over one year, a top-quartile figure for the sector, which returned 3.92 per cent over the same period.
Performance of fund vs sector and benchmark over 1-yr
Source: FE Analytics
A strong rally in financials is behind the turnaround in performance for the fund, according to Morgan, but he warns that if there is a shock, it will be hit hard.
"It’s all these contrarian managers having their day really," he finished.