The best-performing fund managers of the last decade
Risk-averse managers who have sought to protect against the downside have been rewarded with stellar long-term returns.
By Joshua Ausden, News Editor, FE Trustnet
Thursday July 26, 2012
Invesco Perpetual’s Paul Causer
has the best risk-adjusted return of any FE Alpha Manager over the last 10 years, according to FE Trustnet
The manager, who heads up six Invesco Perpetual bond and multi-asset funds as well as the SJP Corporate Bond portfolio, has a Sharpe ratio of 1.15 over the period. The second-best performer – First State’s Martin Lau
– is well behind, with a score of 0.91.
Performance of managers vs peer groups over 10-yrs
Source: FE Analytics
The Sharpe ratio is used to determine which funds had the best risk-adjusted performance over the set periods. The ratio measures a fund's return relative to a notional risk-free investment – in this case, cash. The difference in returns is then divided by the fund's volatility.
According to FE data, Causer has returned 201.82 per cent over 10 years, compared with gains of just 79.81 per cent from his peer group composite.
While Lau has returned significantly more, Causer’s extremely low volatility has compensated for this; the fixed interest manager has an annualised score of just 7.38 per cent over the period, compared with Lau’s 20.32 per cent.
Causer has headed up the Invesco Perpetual Corporate Bond
, Monthly Income Plus
and European High Yield
portfolios over the entire 10-year period.
All three are top-quartile in their respective sectors over this period. In more recent years, the manager has also taken charge of the Invesco Perpetual Tactical Bond
fund, as well as the Distribution
and European High Income portfolios, which have some equity exposure.
He has only underperformed his peer group in one of the last 10 12-month periods. This has come in the last year, which is partially down to the manager’s overweight in banking stocks.
The top-10 list is a mix of equity, bond and multi-asset focused managers, including some of the highest-profile names in the entire industry.
Top-10 managers over 10-yrs
Source: FE Analytics
Small cap experts Harry Nimmo
and Giles Hargreave
take the third and fourth spots respectively. The managers’ Standard Life UK Smaller Companies
and Marlborough Special Situations
portfolios are among the most popular in the IMA universe with those looking for exposure to this area of the market.
Also on the list is Lau’s First State colleague Angus Tulloch, who is among the highest-rated managers in the emerging market space.
Defensively focused multi-asset managers Martin Gray
and Sebastian Lyon
also make the top-10, thanks largely to their stellar record during down markets and below-average volatility.
UK equity managers Nick Train and Anthony Cross
and fixed interest expert Stewart Cowley
complete the top-10. There was no place for highly rated fixed interest managers Richard Woolnough
or Ian Spreadbury
however, who came 11th and 14th respectively.
Performance of portfolio and index over 10-yrs
Source: FE Analytics
A portfolio with an equal weighting to each manager would have returned 269.14 per cent over the last decade. This compares with 199.09 per cent from the FTSE All Share, which has been significantly more volatile.
The majority of managers on the list are distinguished by their attitude towards risk. The likes of Tulloch, Lau and Cross concentrate on quality, sustainable companies and resist the temptation to chase spectacular returns in rising markets.
The same can be said of Gray and Lyon, who have maintained a significant degree of exposure to low-risk, uncorrelated asset classes – even when markets were rallying in 2009 and 2010.
A recent FE Trustnet
study revealed that funds that outperform during downturns have topped the performance charts over five years – something that Chelsea Financial's Darius McDermott thinks could continue to be the case.
"If volatility is on the same level as we’ve seen since the financial crisis, then you’re definitely going to want to be in those that protect against the downside," he said.
"When a fund falls 20 per cent more than a rival, it is very, very difficult for them to make that money back."