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Are these the 50 best ever equity fund managers?

17 November 2016

Research from Tilney Bestinvest takes a look at 497 fund managers’ track records over their entire investment careers.

By Lauren Mason,

Senior reporter, FE Trustnet

Neil Woodford, Martin Cholwill and Liontrust duo Anthony Cross and Julian Fosh are the top-performing equity fund managers over the course of their entire career, according to data from Tilney Bestinvest.

The research looked at the 497 equity managers in the Investment Association universe whose track records span more than five years.

Then, looking over their entire career paths, managers were given a score based on various fundamentals including their average monthly excess performance versus their benchmarks as well as their excess returns over five years, the consistency of their strong returns and the length of their track records.

Jason Hollands (pictured), managing director of Tilney Bestinvest, said: “The differences in return between the best and worst performing actively managed funds is enormous and simply cannot be explained by variations in fund costs but rather are the result of the investment decisions made.

“If you are going to invest with actively managed funds it is therefore vital to select the right managers and to always reassess the case for continuing to hold a fund when the manager or team changes as they inevitably do in a highly competitive industry.

“The dilemma for investors is that fund performance data is typically provided for a period of just five years, which is barely an economic cycle and in any case such data may be of very limited relevance if it relates to the tenure of a manager who is no longer at the helm. We therefore believe it is vital to assess the relevant, full career track record of the current manager in a sector which may span multiple employers.” 

It must be noted that, while charges and expenses can impact returns, the team at Tilney Bestinvest says they are irrelevant when assessing a fund manager’s investment decisions and whether they have managed to add value.

As such, the team stripped out any cost impact to that data which, not only meant all managers started on a level playing field, but their skills as a fund manager were fairly assessed. In terms of those who have run – and do run – multiple portfolios, their track record was blended.

“While analysing a manager’s historic track record is important, choosing a fund based solely on past performance is as inadvisable as driving a car staring into the rear view mirror alone,” Hollands warned.

“In considering a manager’s future prospects there are other factors to consider, such as whether they are running too much money and if capacity could impact their investment style as well as an assessment of whether the fund they are now managing has an attractive structure and reasonable costs.

“We therefore see this type of past performance analysis as a useful starting point rather than a complete formula for picking a fund.”

With this caveat in mind, the manager who has taken the top spot for his total performance track record is Neil Woodford.

The star manager is of course a firm household favourite among investors. While he first started his career as a fund manager in 1987 when he joined Eagle Star, he is best-known for his time at Invesco Perpetual, where he managed the Invesco Perpetual High Income fund from 1988 and Invesco Perpetual Income from 1990.

In 2014, he left the firm to found his own fund management house, where he runs the £9.3bn Woodford Equity Income open-ended fund and the closed-ended Woodford Patient Capital Trust, which has an AUM of £785m.


Over Woodford’s career, he has outperformed his benchmark by an average of 0.3 per cent per month. He has achieved the same outperformance over five years.

Since the turn of the millennium, the manager has outperformed his peer group composite by 222.55 percentage points with a total return of 341.28 per cent. Over five years, he has outperformed by 6.01 percentage points with a return of 66.25 per cent.

Performance of Woodford vs peer group composite since 2000

 

Source: FE Analytics

The second-highest performing manager according to Tilney Bestinvest’s research is FE Alpha Manager Martin Cholwill, who has run the five crown-rated Royal London UK Equity Income fund since January 2005.

The manager started his career at AXA in 1983, where he ran a number of mandates including their UK Equity Income fund, which he took over in 1996.

The manager is well-known for his benchmark-agnostic approach, which leads him to invest across the cap spectrum based on his conviction on each individual stock. He looks for reliable businesses with strong management teams and believes that free cash flow is one of the most important metrics to consider.

According to Tilney Bestinvest’s study, Cholwill has outperformed his benchmark by an average of 0.21 per cent each month over the course of his career. Over the last five years, he has outperformed by 0.46 per cent.

Compared to his peer group composite, the manager has outperformed by 90.22 percentage points since the turn of the millennium with a total return of 223.1 per cent and, over five years, has outperformed by 37.1 percentage points with a 98.78 per cent return.

Performance of Cholwill vs peer group composite since 2000

 

Source: FE Analytics

Next up is FE Alpha Manager duo Anthony Cross and Julian Fosh, who have worked together since Fosh joined the firm from Saracen in 2008.

Having joined Liontrust in 1997 after three years on the smaller companies team at Schroders, Cross created the ‘Economic Advantage’ process to identify companies that have sustainable competitive advantages versus their peers.

Fosh helped to further develop this process when he joined the firm. It is still adopted across all four of the managers’ funds – Liontrust Special Situations, Liontrust UK Smaller Companies, Liontrust UK Growth and their newly-launched Liontrust UK Micro Cap fund, which opened its doors to investors in March this year.

Tilney Bestinvest’s data shows that collectively the managers have outperformed their benchmark by an average of 0.51 per cent on a monthly basis. Over five years, they have outperformed by 0.37 per cent.


Since June 2008 – when Fosh and Cross first started working together – they have more than tripled the return of their peer group composite with an average return of 163.24 per cent.

Performance of Fosh and Cross vs peer group composite since June 2008

 

Source: FE Analytics

The next manager on Tilney Bestinvest’s list is FE Alpha Manager Richard Pease, who has managed money for more than 30 years at firms such as Windsor Investment Management, Jupiter Asset Management and New Star Asset Management. The firm was acquired by Henderson in 2009, which was when he launched the top-performing Henderson European Special Situations fund.

In 2014, Pease joined boutique asset management firm CRUX, carrying over his five crown-rated fund, which is now called CRUX European Special Situations and is £1.3bn in size.

The manager is renowned for his bottom-up approach to stock selection and, alongside co-manager James Milne who joined in 2015, looks for companies with strong pricing power, excess cash on their balance sheet and have low capital requirements. He avoids stocks that are particularly dependent on macro events such as utilities and telecoms. 

Tilney Bestinvest’s data shows the manager has outperformed his benchmark by an average of 0.43 per cent each month over the course of his career. He has outperformed his benchmark by 0.29 per cent over five years.

Since 2000, Pease has outperformed his peer group composite by 308.09 percentage points with a total return of 427.97 per cent. Over five years, he has returned 102.15 per cent compared to his composite’s return of 76.88 per cent.

Performance of Pease vs peer group composite since 2000

 

Source: FE Analytics

The top 50 results of Tilney Bestinvest’s study are listed over the next two pages.



Source: Tilney Bestinvest


Source: Tilney Bestinvest

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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.