Many active managers have outperformed the FTSE All Share over the past few years, but only a handful of UK funds were able to beat the index over each of the last three calendar years. 
With more and more investors using passive vehicles and an overemphasis on safety, a number of the largest defensive stocks have performed extremely well since 2014.
As the FTSE 100 index (which contains most of the outperforming defensive companies) makes up around 80 per cent of the All Share, it has made active management fairly straightforward – buy these stocks and watch the returns rise.
However, last year a shift occurred as more value stocks outperformed growth companies for the first time in recent years.
Indeed, Neptune fund manager Robin Geffen warned small and mid-cap investors were now at the end of the “free lunch” they have enjoyed since the end of the global financial crisis.
As the below graph shows, both the IA UK All Companies and UK Equity Income sectors underperformed the FTSE All Share index last year but managed to outperform in 2014 and 2015.
Performance of IA UK sectors vs FTSE All Share over 3yrs
Source: FE Analytics
Below, FE Trustnet looks at three funds that have managed to outperform the FTSE All Share over the last three consecutive calendar years, proving they can outperform when either the growth or value styles are in favour.
The largest fund to have outperformed the FTSE All Share index is the £2.2bn Jupiter Income Trust fund overseen by Ben Whitmore.
The four crown-rated fund has outperformed the index for the past four calendar years and has been a top quartile performer in the IA UK Equity Income sector over one and three-year timeframes.
Indeed, as the below graph shows, the fund has outperformed the FTSE All Share by 8.96 percentage points, and the sector by 8.80 percentage points.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
Square Mile UK Income Analyst, John Monaghan, said: “The approach employed draws heavily on two quantitative screens.”
“The first highlights stocks that are undervalued relative to their long-term history, whilst the second looks to identify companies that offer the most attractive combination of low valuations and high return on capital.”
“This inherently places the manager’s style in the ‘value camp’ with the characteristics sought being the ability of a company to generate cash as opposed to profits, the margin of safety in its valuation and the strength of the balance sheet.”
He added: “The funds’ unconstrained natures helps the manager avoid areas where he sees limited potential for upside.”
“Mr Whitmore spent 2015 increasing exposure to commodities and emerging market related stocks (BP, Shell, South32, HSBC Holdings, Standard Chartered and Ashmore Group) and these stocks have performed well.”
“The fund also benefited in the aftermath of the Brexit vote. This was not due to making a correct call on the referendum but based on the view that most UK consumer cyclicals were very highly valued going into the vote and hence exposure to those names was low.”
Another outperforming fund is the five crown-rated Evenlode Income fund, run by Hugh Yarrow, which has outperformed the FTSE All Share in every calendar year since 2010, having launched in late 2009.
The £1bn fund has also been a top quartile performer in the IA UK Equity Income over one, three and five years.
Performance of fund vs benchmark and sector since launch
Source: FE Analytics
Over the past five years, the fund has outperformed the FTSE All Share by 56.50 percentage points and the sector by 50.98 percentage points.
Chelsea Financial Services managing director Darius McDermott said: “This fund is run under a consistent and durable philosophy and process. “
The fund, which concentrates on quality businesses with a focus on high returns and low debt and also keys in on strong cashflow generation runs a concentrated portfolio of between 30 and 40 stocks.
“Their style has been in favour for the last three years and hence the outperformance. They were a bit more average in the second half of last year as value was the major theme in the market,” said McDermott.
“This is a top fund and one we would expect to continue to outperform over the medium term and beyond. Because they don't buy poor quality capital intensive companies they will underperform if there is strong mining or financials rally.”
Finally, the £250m Liontrust UK Growth run by FE Alpha Managers Anthony Cross and Julian Fosh have outperformed the FTSE All Share over the last three calendar years.
It is the only fund of the three with a higher weighting to the mid- and small-caps with only 51.6 per cent invested in the FTSE 100.
The four crown-rated fund has outperformed the IA UK All Companies sector and the FTSE All Share by 15.43 and 13.20 percentage points respectively.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
Ben Williams, investment manager at Saunderson House, said: “We like Cross and Fosh’s investment process and philosophy, based on identifying those companies that have a durable ‘Economic Advantage’, such as intellectual property, good distribution or recurring revenue.”
“The past few years have been more favourable to ‘quality growth’ which has benefited the fund (and UK growth) though for the past 12 months we’ve biased portfolios towards more cyclical/value areas of the market.”
“Hence our allocation to the strategy is currently quite low but we would be keen to add more to the fund if was saw a period of underperformance versus their peers as we rate Cross and Fosh highly.”
However, Williams says Saunderson House has been long term investors in the Special Situations fund, which “has more flexibility to invest in mid- and small-cap parts of the market”.