Here we look at some funds that top their respective sectors when it comes to adding value – or Alpha – but which may have passed some investors by.
North America
It is no surprise to see GAM North American Growth top the list of funds that have generated the most annualised Alpha in their sector over five years.
FE Alpha Manager Gordon Grender has headed up the portfolio since 1983, during which time he has delivered returns of 2,387.93 per cent.
Over five years it heads the sector, with returns of 93.09 per cent, meaning Grender has almost doubled investors’ money in one of the most turbulent periods in the history of the stock market – and in a sector known to be one of the hardest to beat with active management.
By comparison, the S&P 500 benchmark has made just 37.73 per cent in that time while the average fund in the IMA North America sector has made 42.38 per cent.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
Over the past three years, Grender has provided average annualised Alpha of 6.51 per cent, while over five years the figure rises to 8.06 per cent, boosted by the portfolio’s volatility over the period being lower than that of the S&P 500.
It requires a minimum initial investment of £6,000 and has a total expense ratio (TER) of 1.57 per cent.
Asia Pacific ex Japan
While Aberdeen Asian Smaller Companies and First State Asia Pacific Sustainability top the Alpha tables over three and five years, the appearance of Newton Asian Income and Schroder Asian Income in the top bracket is more of a surprise.
Measured against the MSCI Asia Pacific ex Japan benchmark, Newton Asian Income has generated 12.11 per cent of annualised Alpha over three years and 8.57 per cent over five.
Schroder Asian Income has generated 7.67 per cent over three years and 6.43 per cent over five.
Jason Pidcock’s five crown-rated portfolio has been a top-seller of late and is highly rated by the FE Research team, as reported last week.
The portfolio currently provides a healthy yield of 4.4 per cent, according to data from FE Analytics, and is a top-quartile performer over three and five years.
Over the longer period it has made 99.57 per cent, higher than Schroder Asian Income, which has returned 84.44 per cent.
Performance of funds vs sector and benchmark over 5yrs
Source: FE Analytics
The Schroder fund has been around longer than the Newton portfolio, having been launched in the 1990s and taken over by Richard Sennitt in 2001.
It is also top quartile over three and five years, but over 10 years has made marginally less than the sector average: 274.72 per cent compared with 280.98 per cent.
Both portfolios have a high weighting to Australia, which provides Asian managers with some of the most reliable dividends in the region.
They both require a minimum initial investment of £1,000 and the TERs are comparable: 1.66 per cent for the Newton fund and 1.7 per cent for the Schroder fund.
Europe
While the IMA Asia Pacific ex Japan sector generally has a good track record of providing Alpha, the IMA Europe sector – like its North America counterpart – does not.
The five crown-rated Threadneedle European Select and BlackRock European Dynamic funds stand out in this sector over three years.
Over that period Threadneedle European Select, managed by FE Alpha Manager David Dudding, has provided annualised Alpha of 10.35 per cent on its FTSE World Europe ex UK benchmark, according to our data.
FE Alpha Manager Alister Hibbert’s fund has provided 8.82 per cent of annualised Alpha against the same benchmark.
Performance of funds vs sector and benchmark over 3yrs
Source: FE Analytics
Both funds have more than doubled the 18.53 per cent returns of the index over that time, with the Threadneedle fund performing better.
Dudding’s portfolio has also been substantially less volatile, which will also push up its Alpha score.
Threadneedle European Select has an annualised volatility of 15.54 per cent over the past three years, according to data from FE Analytics, while the figure for the BlackRock fund is 18.91 per cent – marginally higher than the 18.85 per cent of the sector.
BlackRock European Dynamic has a large overweight in Denmark thanks to a 6.7 per cent holding in Novo-Nordisk – the fund’s largest position.
It is also overweight France and Germany and underweight Spain, Italy, Sweden and Switzerland.
The Threadneedle fund overweights Sweden, Finland and the Benelux countries, but is significantly underweight France.
It requires a minimum initial investment of £2,000 and has a TER of 1.68 per cent, while the BlackRock fund requires only £500 as a first investment and charges 1.67 per cent.