The power of compounding means it is the very oldest funds that have returned the most since inception; however, annualised returns enable investors to directly compare the performance of funds with varying track records. If you had backed the £549m Schroder US Smaller Companies fund since its launch in February 1990, you would have made annualised returns of 17.12 per cent. Over the same period, an investment in the S&P 500 would have made you annualised returns of just over 10 per cent.
The fund has been headed up by FE Alpha Manager Jenny Jones (pictured) since December 2002, with Ira Unschuld running it for the 10 years before her.
Source: FE Analytics
Fidelity Special Situations has returned significantly more than the Schroders fund since inception, having been launched in 1979, but from an annualised point of view it has returned slightly less, at 16.95 per cent. Star manager Anthony Bolton led the fund to unprecedented success for the first 30 years of its life, with Sanjeev Shah and Alex Wright taking the baton in recent years.
Bolton is the best represented manager on the list, given that he also ran the Fidelity European portfolio from its launch in 1985, up to 2002. It has delivered annualised returns of 15.49 per cent, putting it third overall. The fund has had varying levels of success under Timothy McCarron and Samuel Morse in recent years, however.
The little-known Skagen Vekst portfolio comes in fourth with 15.37 per cent. The fund sits in the IMA Specialist sector, though is most comparable to IMA Global. Beate Bredesen and his team have a keen bias towards Scandinavia, holding 40 per cent in Norway alone. It has a composite benchmark, split 50/50 between the MSCI AC World and Oslo All Share.
Skagen Vekst is not currently on any of the major platforms, but the firm says it is considering making the £1bn fund more readily available to UK investors.
M&G Recovery, the oldest fund in the IMA universe, has annualised returns of 14.68 per cent since its launch in May 1969.
Current manager Tom Dobell has come under scrutiny for a poor two years or so, but an investor who backed it at inception is unlikely to be too concerned: FE data shows the fund has returned close to 50,000 per cent.
To put this another way, if you had put £10,000 in M&G Recovery in May 1969, you would be sitting on the best part of £5m profit today.
Performance of £10,000 initial investment since launch
Source: FE Analytics
The rest of the top-10 is made up solely of European and UK-focused funds, including Jupiter European and GAM UK Diversified, which has been headed up by FE Alpha Manager Andrew C Green since its launch in August 1990.
Some readers will be surprised not to see the £11bn Invesco Perpetual High Income fund on the top-10 list, which Neil Woodford (pictured) led to consistent outperformance from its launch in February 1988 to his departure in March of this year. Annualised returns of 13.03 per cent were only enough to see it come 12th overall.
James Henderson’s Henderson UK Equity Income & Growth fund has managed annualised returns of 13.6 per cent since its launch in 1974, putting it in first place among income-focused UK funds.
Both the Henderson and Invesco funds have recently moved out of the IMA UK Equity Income sector, due to their inability to consistently hit their 120 per cent FTSE yield target. Both groups said they were unwilling to sacrifice their total return objective in order to hit the target, and looking at their successes over recent decades, who can blame them? The study only included the 200 or so established funds with at least a 20-year track record, as those that have been launched in recent years may have their results skewed by one or two stellar years or even months. For example, the Fidelity Index Emerging Markets tracker fund has annualised returns of almost 30 per cent, but only because it has returned 7.29 per cent since its launch in March of this year.
Weekly return periods were used in the calculation.
No emerging market funds came close to making it into the top-10. Henderson China Opps managed annualised returns of 12.69 per cent, putting it 16th overall, with Hugh Young’s Aberdeen Asia Pacific Equity portfolio down in 30th with 11.9 per cent.
Tim Cockerill (pictured), investment director at Rowan Dartington, says that the huge returns and profits outlined here illustrate the importance of genuine long-term investment.
“This absolutely illustrates that over the long-term, you see the proper benefits of investing,” he said. “If you put these funds up against cash, they come out well on top, and this encapsulates times of real market stress – the 1987 crash, the dotcom bubble and the global financial crisis.”
“Not thinking about it too much and leaving it to accumulate has been hugely rewarding. It’s a strong message of what collectives can do for you.”
FE has data for the Bank of England Base Rate – the standard measure of cash – going back to February 1975. Over that period, the index has delivered a return of 1,561.79 per cent, which equates to an annualised return of 7.39 per cent.
By contrast, the Henderson UK Equity Income & Growth fund has returned 15,829 per cent over the same period and an annualised return of 13.68 per cent.
Performance of fund and index since Feb 1975
Source: FE Analytics
Even a higher yielding cash account has not come close to keeping up with the Henderson fund, as outlined by the performance of the Bank of England +3 per cent index above.
A thought to leave you with: M&G Recovery was launched just over 45 years ago. If you are 30 years old and have £10,000 or even £1,000 to hand, imagine how pleased you would be if you locked it away and came back to it at 75…if the last few decades are anything to go by, you’d have a handy leg-up in retirement.
In an upcoming FE Trustnet article, we’ll ask experts to identify possible contenders for investors with such a long-term time horizon.