However, the vast majority of investors still prefer open-ended funds.
Emerging Markets and UK Smaller Companies proved to be the highest-growth sectors of the last decade, doubling the returns of the average UK All Companies and Global funds.
The IMA Global Emerging Markets sector has returned 348.1 per cent over 10 years. The worst-performing fund in the sector over the decade returned more than each of the other sector averages.
Performance of sectors over 10 yrs
Source: FE Analytics
While it may seem a no-brainer to plunge into emerging markets funds for growth, investors need to keep in mind they are more volatile than global or UK-focused peers.
The Global Emerging Markets sector has an annualised volatility of 20.2 per cent over 10 years, while the Global and All Companies sectors score 14.63 per cent and 15.94 per cent respectively.
The UK Smaller Companies sector – which is often considered more volatile given its exposure to less-established companies – was the least volatile over the last decade, at 12.95 per cent.
Global Emerging Markets
The best growth fund of the last 10 years in terms of total return is the five crown-rated Aberdeen Emerging Markets.
Over the period it has returned 599.7 per cent, compared with 372.61 per cent from the MSCI Emerging Markets index.
Performance of fund vs sector and index over 10 yrs
Source: FE Analytics
The £3.7bn portfolio is headed up by Aberdeen’s experienced emerging markets team and is tilted toward financials – with Brazilian banking giant Banco Bradesco and major Mexican bank Banorte featuring in its top-10 holdings.
Although Aberdeen has moved to slow inflows, the fund is still available for a minimum investment of £500. The fund has a total expense ratio (TER) of 1.93 per cent.
The First State Global Emerging Markets and Lazard Emerging Markets funds are both standout performers over 10 years, returning 472.61 per cent and 454.14 per cent respectively.
UK Smaller Companies
FE Alpha Managers Daniel Nickols (pictured) and Giles Hargreave top the charts in the UK Smaller Companies sector over the last 10 years.
Nickols’ five crown-rated Old Mutual Dublin UK Select Smaller Companies fund was the best performing in the sector, returning 581.28 per cent, while Hargreaves’ four crown-rated Marlborough Special Situations fund made 527.16 per cent.
Both funds more than doubled the returns of the IMA UK Smaller Companies sector, which returned 232.11 per cent over 10 years.
Performance of funds vs sector over 10 yrs
Source: FE Analytics
Nickols has only been leading his fund since 2009, while industry stalwart Hargreaves has been managing the Special Situations portfolio for 15 years.
The Dublin-domiciled Old Mutual portfolio requires a minimum investment of £1,000 and has a TER of 1.94 per cent, while the Marlborough fund requires a minimum investment of £1,000 and has a TER of 1.54 per cent.
UK All Companies
Mid cap funds trounced their larger cap competitors in the UK All Companies sector, with the four crown-rated Franklin UK Mid Cap portfolio topping the tables over the decade.
Over 10 years, the fund has returned 437.11 per cent, compared with 141.68 per cent from the sector.
It is run by FE Alpha Manager Paul Spencer.
Among the other top funds in the sector are Old Mutual UK Select Mid Cap, Invesco Perpetual UK Aggressive, the five crown-rated Cazenove UK Opportunities and Schroder Recovery.
Top-5 funds over 10-yrs
| Fund | Returns (%) |
|---|---|
| Franklin UK Mid Cap | 437.11 |
| Old Mutual UK Select Mid Cap | 376.04 |
| Invesco Perpetual UK Aggressive | 274.94 |
| Cazenove UK Opportunities | 264.28 |
| Schroder Recovery | 262.36 |
Source: FE Analytics
Global
Another smaller companies portfolio topped the tables in the Global sector. The little-known McInroy & Wood Smaller Companies fund made 316.58 per cent over the decade, followed by the M&G Global Basics and Invesco Perpetual Global Smaller Companies funds.
The tiny £37.5m fund, headed up by FE Alpha Manager Tim Wood, is relatively evenly split between Europe, the UK and the US – with 30 per cent each in Europe and the UK and 27 per cent in North America.
Among the fund’s top holdings are US auto parts chain O’Reilly Automotive and French animal health company Virbac.
The fund requires a minimum investment of £10,000 and has a TER of 1.61 per cent.