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The cheap UK funds that have consistently outperformed

11 August 2014

Consistent outperformance is something many funds strive for, but only a handful of members of the UK All Companies sector have managed to achieve this without sky-high fees.

By Gary Jackson,

News Editor, FE Trustnet

Investors dream of their funds outperforming year after year, no matter how difficult this is to achieve in practice, but in order to do so you have to be prepared to pay up for active managers.

FE Trustnet has examined the UK equity managers who have outperformed their peers over the past decade. And for the cost-conscious investor, we’ve further narrowed this down by highlighted those with the lowest ongoing charges.

To discover these funds, we have looked for IMA UK All Companies members with first or second quartile performance in at least seven of the past 10 years, and with a clean ongoing charges figure (OCF) of less than 0.85 per cent.

This left a list of eight actively managed funds, although their past performance is no guide to the future.

ALT_TAG The £4.6bn AXA Framlington UK Select Opportunities fund, headed up by FE Alpha Manager Nigel Thomas, was shown to be the most consistent of the funds in the sector, outperforming its peer group average in nine of the past 10 years.

FE Analytics shows Thomas has delivered annualised returns of 12.2 per cent over the past decade, sitting in the sector’s first quartile in 2004, 2005, 2009, 2010 and 2011 and in its second quartile over 2006, 2007, 2008 and 2011.

In 2012, its only year of underperformance, AXA Framlington UK Select Opportunities was fourth quartile, but still managed double digit returns.

Thomas (pictured) runs a diversified portfolio, with around one-third in large caps and the remainder spread between mid and small caps. The manager’s process is largely bottom-up and holds high regard with regularly meeting company management to gauge their plans for the business.

AXA Framlington UK Select Opportunities, which has returned 185.57 per cent over the 10 years against a sector average of 122.16 per cent, has an OCF of 0.83 per cent.

Performance of fund vs sector over 10yrs

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Source: FE Analytics

The £991m Franklin UK Mid Cap fund is the second most consistent outperformer, sitting in the first or second quartile of the sector in eight of the past 10 full calendar years.

Lead manager Paul Spencer is an FE Alpha Manager and has managed the fund for eight-and-a-half years, returning an annualised 13 per cent over this time.

The fund has achieved first-quartile returns in eight years over the past decade, taking its total return for this period to 365.26 per cent and making it the best performing fund in the sector during the period in question.


Spencer insists on buying holdings at the right price, using bottom-up fundamental analysis to find opportunities where the valuation offers a margin of safety.

This tends to lead the fund, which has an OCF of 0.82 per cent, to companies showing superior organic growth, predictable cash flows and unique business models.

It must be noted that the FTSE 250 has had a tricky 2014 to date, falling 2.83 per cent.

Franklin UK Mid Cap has fared significantly worse than this with a drop of 6.59 per cent, which has pushed it into the fourth quartile of the IMA UK All Companies sector over one year as well as three and six months.

Performance of fund vs sector over 10yrs

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Source: FE Analytics

For those investors really focused on cost, CIS Sustainable Leaders was the cheapest consistent outperformer thrown up by our research. The fund is ran by FE Alpha Manager Mike Fox and has an OCF of just 0.78 per cent.

It has beaten the sector average in seven years during the past decade, making a 10-year return of 164.33 per cent.

The £405.9m fund, which focuses on themes of environment, human welfare and sustainability, aims for first-quartile performance over a rolling three-year period.

It sits in the first quartile in five of the most recent calendar years - 2004, 2006, 2008, 2012 and 2013 - and is second quartile in 2005 and 2011.

However, Royal London CIS Sustainable Leaders was in the fourth quartile for all three of the remaining years.Over 2014 to date, it has lost 3.85 per cent against the average IMA UK All Companies fall of 2.83 per cent.

Performance of fund vs sector over 10yrs

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Source: FE Analytics


Another five IMA UK All Companies members with OCFs of less than 0.85 per cent have outperformed in seven of the past 10 years.

These are Derek Stuart’s Artemis UK Special Situations, Paul Mumford’s Cavendish Opportunities, Andrew Jackson’s Ecclesiastical UK Equity Growth, James Henderson's Henderson UK Equity Income & Growth and Andrew Brough’s Schroder UK Mid 250 funds.

Stuart, Jackson, Henderson and Brough are all FE Alpha Managers.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.