Morgan Stanley has been deemed as having the most consistently strong stock-picking team in new research, returning to the top of FundCalibre’s Fund Management Equity Index after losing out to Baillie Gifford last year. 
Fund research ratings agency FundCalibre said the index helps identify the asset management houses that “have demonstrated they can add value for their equity investors year in, year out”.
Using data from FE Analytics, the agency compares equity funds’ performance with that of their sector over the past five years then collates them by asset management house to calculate each’s average performance. Fund groups must have a minimum of four qualifying funds to be included in the index.
The 2022 iteration of the FundCalibre Fund Management Equity Index put Morgan Stanley in first place after all of the seven funds looked at outperformed their average peer over the past five years.
Top 20 groups in the 2022 FundCalibre Fund Management Equity Index
Source: FundCalibre
Morgan Stanley had held the top spot in the index during 2018, 2019 and 2020 before being bumped into second place by Baillie Gifford last year. However, the firm has pushed Baillie Gifford back to second after the average fund in its equity franchise outperformed by 44.6 percentage points over the five years to 31 December 2021.
Among the firm’s funds that have made some of the highest returns over the period under consideration are Morgan Stanley US Advantage (up 148.4%, versus 97.6% from the IA North America sector) and Morgan Stanley Global Brands (up 101.7% compared with 77.7% from the IA Global sector).
FundCalibre managing director Darius McDermott said: “FundCalibre’s research demonstrates quite clearly that good active management is not a myth or simply good luck – it is very much based on skill.
“Baillie Gifford and T. Rowe Price, for example, have both been in the top 10 for each of the eight surveys we have compiled the report, spanning a time period of more than a decade. That shows consistently excellent stock-picking skills and value added for investors.”
McDermott added that this year’s research highlighted five clear trends, the first being that growth-focused houses continue to dominate the top of the table. Morgan Stanley, Baillie Gifford, T. Rowe Price, Martin Currie and Comgest all appear in the top 20 and are known for following the growth style of investing, which has outperformed for much of the past decade.
But the second trend is that the gap between growth and value is starting to narrow. The overall outperformance of growth-biased groups such as Morgan Stanley and Baillie Gifford has “fallen considerably” from a year ago after a challenging 12 months for the growth style.
The third finding was that value is still struggling, despite the challenges facing growth investing. McDermott noted that fund house such as M&G, Schroders and Invesco – which have large value investing teams – are still in the bottom half of the Fund Management Equity Index.
“However, there are some signs that we might be reaching a turning point as interest rates start to rise,” he added. “Despite the five-year underperformance, all three of these groups delivered a small outperformance in 2021 – possibly a good sign for the future.”
Moving away from growth versus value, McDermott said the 2022 index showed turnarounds in performance are possible. He pointed to Martin Currie’s “extraordinary turnaround” as evidence; the group was the second worst performing fund group when FundCalibre first ran the index in 2015 but climbed to 14th place (out of 71) in the latest edition.
“There have been quite a few changes [at Martin Currie] over the past eight years, not least the takeover by Legg Mason,” he explained. “Zehrid Osmani, head of the global unconstrained team, joined from BlackRock in May 2018 and has proven to be a very important addition in helping to turn around a number of strategies. FTF Martin Currie European Unconstrained has been the top performer delivering 47% outperformance.”
Finally, McDermott argued that the research showed investors do not have to rely on the big familiar names as “the UK market is blessed with an incredible array of quite brilliant smaller boutique managers but many of them go under the radar of average investors”.
Some well-known funds run by boutiques – or a fund manager houses running a small number of strategies – include Fundsmith Equity and LF Lindsell Train UK Equity, while more off-the-radar outperformers include MI Chelverton UK Equity Growth, Slater Recovery, LF Gresham House UK Micro Cap, Seilern World Growth and Aubrey Global Emerging Markets Opportunities.