Out of 250 IA UK All Companies funds only six have delivered consistently positive returns while minimising investor losses since 2011.
Trustnet looked at which funds in the IA UK All Companies sector had the highest number of positive months over the past 10 years, filtering it further to the top 25% of funds that have lost investors the least in one go (maximum drawdown) during that time. All funds have also made top quartile returns.
Source: FE Analytics
All funds on the list have an FE fundinfo Crown rating of five.
Liontrust Special Situations
Two Liontrust portfolios appear in the study: Liontrust Special Situations and Liontrust Sustainable Future UK Growth.
The first, Liontrust Special Situations, is a portfolio made up of FE fundinfo Alpha Managers Anthony Cross and Julian Fosh’s “best ideas,” said Rob Morgan, pension and investment analyst at Charles Stanley Direct.
They identify companies with ‘long-lasting advantages’ which “allow these firms to defy competition and drive a higher level of profitability than expected,” Morgan said.
Rather than just focusing on valuations alone the pair’s ethos is that long-term outperformers possess certain strengths which competitors would struggle to replicate – a theory the pair use on all of their equity funds.
The fund’s outperformance wasn’t purely down to its quality-growth style, which has rallied through the past decade, according to Morgan, but also the managers’ stock picking abilities and being generally well diversified across different sectors.
Over the past decade, this has helped the fund through 84 positive months out of 120, with a maximum drawdown of 21.1%. It generated a total return of 208% compared with the IA UK All Companies sector, which made 107.7%, and FTSE All Share benchmark, up 88.6%.
Fund vs sector and index over 10yrs
Source: FE Analytics
The £6.2bn Liontrust Special Situations fund has achieved this with volatility of 11.6% – the third-best in the sector.
It has an ongoing charges figure (OCF) of 0.82%.
Liontrust Sustainable Future UK Growth
The second Liontrust portfolio on the list is run by veteran sustainability managers, Peter Michaelis and Martyn Jones.
Heading the Sustainable Investment Team the managers apply Liontrust’s environmental, social and governance (ESG) process to the £1.1bn Liontrust Sustainable Future UK Growth fund.
They look for companies that have three characteristics: excellent management and core products or services that are making a positive contribution to society, strong growth prospects, and a business model that enables them to grow profitably from these trends.
Running a quality growth bias has been beneficial for equity funds over the past decade but the Liontrust Sustainable Future UK Growth has also benefited from sustainability becoming more popular, according to Morgan, although these themes have hurt the fund’s performance during the recent value rotation.
Morgan added that this was not detrimental to the long-term potential of the fund, since “the managers have also shown considerable skill and an ability to add value.”
Out of a possible 120 it had 78 positive months, generating a total return of 196.9% over 10 years. It had maximum drawdown of 23.3% and volatility of 13.7%.
Fund vs sector and index over 10yrs
Source: FE Analytics
It has an OCF of 0.87%.
TB Evenlode Income
Next is the £3.6bn TB Evenlode Income fund, which had 80 positive months and 40 negative ones. This was achieved with limited volatility of 10.8%, the second-best in the sector. The maximum drawdown was 18.9%.
Run by FE fundinfo Alpha Manager Hugh Yarrow and Ben Peters the managers again look for high quality UK-based companies with global revenue streams.
The managers added that they felt “reassured” by the quality, steady cash generation, and long-term growth potential within the portfolio heading into the second half of 2021.
The fund is currently soft closed, a decision Evenlode said was to protect existing investors in the fund. There is a 5% initial charge for new customers, although this is usually waived for individual investors on most platforms.
Over 10 years TB Evenlode Income made a total return of 189.31%. It has a yield of 2.4% yield and an OCF of 0.87%.
Marlborough Multi-Cap Growth
FE fundinfo Alpha Manager Richard Hallett’s £325m Marlborough Multi-Cap Growth fund was next. This all-market approach means the fund is different to some of its more targeted peers, with the current portfolio split between mid-caps (42.1%), large-caps (20.1%), small-caps (16.7%) and mega-caps (17%).
In each group Hallett seeks out companies with a sustainable competitive advantage which will allow them to continue growing throughout the business cycle, regardless of benchmark or size.
Over ten years Marlborough Multi-Cap Growth had 79 positive months and 41 negative with a maximum drawdown of 23.2%. It returned 213.7% during that time with volatility of 14.6%.
The fund has an OCF of 0.82%.
Lindsell Train UK Equity
Like the above fund Lindsell Train UK Equity also had 79 positive months and 41 negative period, but with a lower maximum drawdown of 18%.
The £6.5bn fund follows FE fundinfo Alpha Manager, Nick Train’s high conviction, buy-and-hold approach used on all his equity portfolios. This has helped him generate consistently high performance, picking stocks with the ability to weather different market conditions.
Consequently the fund made a total return of 231.5% over 10 years. It had volatility of 12.1% and an OCF of 0.65%.
Slater Recovery
Last on the list is the Slater Recovery fund, run by FE fundinfo Alpha Manager Mark Slater. Son of the “legendary investor Jim Slater,” Morgan said that he applied core concepts of his father’s ‘Zulu Principle’ to his own portfolio.
The manager buys into companies with low price-to-earning (P/E) ratios that have strong earnings growth, good cash flows and healthy balance sheets with little debt.
A second layer to the investment process is the ‘recovery’ investment screen. This looks for companies at a discount to net asset value, a discount to cash, and turnaround situations.
Despite generating “excellent performance” with limited losses, Morgan said the fund had remained small and under investors’ radar, “consistently allowing the managers lots of freedom to express their best ideas no matter the company size.”
The £290.7m fund made the third-best total returns in the sector over 10 years, 268.2%.
Fund vs sector over 10yrs
Source: FE Analytics
The maximum drawdown was 22.6% and volatility of 13.6%.
It has an OCF of 0.81%.