As asset manager BMO Global Asset Management highlights a significant drop-off in top quartile performance consistency, FE Trustnet looks at some of the best performers over rolling three-year periods.
It added: “2014 heralded the first wave of expectations of rising central bank interest rates which were swiftly followed by quantitative easing (QE) driven lows in bond markets as these expectations reversed.
“In recent times politics has taken the baton from central banks as the drivers of sentiment for markets. We find the current calm waters un-nerving – we certainly don’t expect a surge in consistency from here.”
Below, FE Trustnet uses its own data to take a closer look at four funds that have been top quartile performers in their respective sectors over rolling three-year periods since 2009. Of course, it must be kept in mind that past performance is no guide to future returns.
Jupiter European
One of three five crown-rated funds in this FE Trustnet study, the £4bn Jupiter European fund is well-known to investors already.
The fund has been managed by FE Alpha Manager Alexander Darwall, the firm’s head of strategy – European growth, since 2001.
The concentrated portfolio aims to achieve long-term capital growth through investment in companies quoted on European stock exchanges.
During the most recent three-year period to 31 March, the fund has returned 42.86 per cent compared with a 29.84 per cent gain for the average sector fund and a 31.72 per cent rise for the benchmark FTSE World Europe ex UK index.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
Rating agency Square Mile noted: “Mr Darwall runs a differentiated fund which focuses on longterm growth opportunities. Intuitively this seems to be an attractive approach but others have struggled to apply the process with sufficient rigour to ensure success.
“The manager in contrast has maintained his discipline and continued to focus on the limited number of companies that meet his selection criteria. As a result, the portfolio tends to be concentrated with between 30 and 40 stocks.
“This may sound like a potentially combustible mix but the manager's diligent research leads him into positions which have limited cross correlations and the risk profile of the fund tends to remain at acceptable levels.
“This in part is thanks to the manager's ability to identify quality stable businesses. Our caveat is that at times the current valuation metrics of the portfolio can rise well above the average stock, in anticipation of short-term boosts to earnings, and this may stall performance relative to the wider market while profits catch up with the valuation.”
The fund has an ongoing charges figure (OCF) of 1.03 per cent.
Stewart Investors Asia Pacific Sustainability
Another five crown-rated fund returning top quartile returns over rolling three-year periods since 2009 is the Stewart Investors Asia Pacific Sustainability fund.
The £430.7m fund is overseen by FE Alpha Manager David Gait and Sashi Reddy. It invests in the shares of companies in or with significant operations in the Asia Pacific region that are positioned to benefit from and contribute to sustainable development of the countries in which they operate.
The fund has returned 65.7 per cent in the most recent three-year period to last quarter end, compared with a 48.24 per cent gain for the average index fund and a 48.16 per cent rise in the benchmark MSCI AC Asia Pacific ex Japan index.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
It has an initial charge of 4 per cent, which is paid back into the fund, and an OCF of 1.02 per cent. The initial charge is designed to limit the size of the fund and protect existing investors, according to the firm.
Threadneedle Monthly Extra Income
The last of the five crown-rated funds – Threadneedle Monthly Extra Income – is situated in the IA UK Equity & Bond Income sector.
The fund is co-managed by Alasdair Ross, head of investment grade portfolio management EMEA, and head of UK equities Richard Colwell.
The mixed investment strategy aims to achieve a high level of income paid monthly with prospects of capital growth.
Currently the fund holds 20.9 per cent of its portfolio in fixed income assets and 0.7 per cent in cash; the remainder is comprised of equity positions.
In the three-year period to 31 March 2017, the fund has risen by 29.08 per cent, compared with the average sector fund return of 22.51 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
Launched in 1999, the fund has a historic yield of 3.7 per cent and has an OCF of 0.73 per cent.
Threadneedle Navigator Cautious Managed
The £12.6m Threadneedle Navigator Cautious Managed fund is another consistent top quartile performer from the asset manager located in the IA Mixed Investment 0%-35% Shares sector.
The four crown-rated fund has been overseen by Alex Lyle, the asset manager’s head of managed funds for Europe, Middle East and Africa, since 1999.
The fund aims to achieve a total return via income and capital growth by investing in a portfolio of its own funds.
In the most recent three-year period to last quarter end, the fund has risen by 20.1 per cent, slightly behind its FTSE All Share benchmark return of 24.87 per cent but ahead of the average sector fund return of 15.49 per cent.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
According to the fund’s key investor information document (KIID), it has an OCF of 1.7 per cent and an entry charge of 5.5 per cent.