Investors who had put money in FTSE All Share tracker funds five years ago would have earned around the same as those who went into actively managed funds which have the index as their benchmark, but would have paid almost half as much in charges, on average.
The data, which looked at all IMA funds over a five year period, shows the average return from a FTSE All Share tracker fund is 25.4 per cent, while its actively managed cousin would have returned 25.7 per cent on average.
There is a big difference in charges, however. The average total expense ratio (TER) – a measure of the total cost associated with managing and operating a fund – of passive funds was 0.79, while active funds using the FTSE All Share as their benchmark have an average TER of 1.53.
But not all active funds have underperformed their benchmarks in the period.
Top 5 active funds over 5-yrs
| Fund | 5-yr return |
TER |
| L&G UK Alpha |
110.35 | 1.72 |
| MFM - Slater Growth |
102.97 | 1.4 |
| Liontrust Special Situations |
78.23 | 1.98 |
| CF - Buxton |
69.45 | 0.65 |
| Newton - Falcon |
63.3 | 1.59 |
| Average of all active funds |
25.7 | 1.53 |
Source: Financial Express Analytics
The L&G UK Alpha Return fund returned 110 per cent to investors in the period, while its IMA UK All Companies sector returned 27.6 per cent. The fund only took on four per cent more volatility than its sector average to achieve those returns. CF Buxton is also worth noting; while it only has £11.1m under management, it has returned almost 70 per cent to investors over five years and has a TER lower than the average tracker fund.
The vehicle, which has a Financial Express Triple Crown rating, invests in a mixture of bonds and equities.
Bottom 5 active funds over 5-yrs
| Fund |
5-yr return |
TER |
| Pru - Ethical |
-6.03 | 1.75 |
| Franklin Templeton - Templeton UK Equity |
-7.4 |
1.75 |
| Thesis - KES Income & Growth |
-13.21 |
1.23 |
| Gartmore - UK Alpha |
-17.08 |
1.48 |
| CF - Canlife UK Smaller Companies |
-24.07 |
1.64 |
| Average of all active funds |
25.7 |
1.53 |
Source: Financial Express Analytics
At the other end of the scale, Franklin Templeton's Templeton UK Equity and Gartmore UK Alpha performed poorly. Templeton UK Equity has lost investors 7.4 per cent over five years, but took on more risk than its IMA UK All companies sector in the period. Canlife UK Smaller Companies exemplifies the risks investors take when investing in small caps.
While the asset class is popular – the IMA UK Smaller Companies sector has returned 35 per cent to investors over five years, with more growth forecast to come – the Canlife fund lost investors money while taking on more volatility. It has a higher-than-average TER of 1.64.
Top 5 passive funds over 5-yrs
| Fund |
5-yr return |
TER |
| Scot Wid - UK All Share Tracker |
30.46 | 0.36 |
| BlackRock - CIF UK Equity Tracker |
28.9 |
0.22 |
| M&G - Index Tracker |
28.01 |
0.46 |
| SSGA - UK Equity Tracker |
27.78 |
0.7 |
| L&G - UK Index Ret |
27.66 |
0.55 |
| Average of passive funds |
25.7 |
0.79 |
Source: Financial Express Analytics
For investors who favour passive funds, the top FTSE All Share trackers over five years include Scottish Widows UK All Share Tracker and BlackRock CIF UK Equity Tracker funds. Both have a below-average TER.