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The giant funds that topped their sectors in 2018

10 January 2019

FE Trustnet looks at funds with assets of more than £1bn that made some of their sector’s highest returns last year.

By Gary Jackson,

Editor, FE Trustnet

Popular funds such as Fundsmith EquityLindsell Train Global Equity and TB Evenlode Income did not disappoint their investors too much in 2018 after being among the handful of portfolios to generate positive returns.

As FE Trustnet revealed in a previous article, last year saw the majority of funds in the Investment Association universe make a loss. Our data shows just 11.2 per cent of 3,764 funds – or 422 products – made a positive return over the 12-month period.

In this article, however, we concentrate on the most popular Investment Association funds by only looking at those with assets under management of more than £1bn.

According to FE Analytics, there are 509 funds that are this large and 99 of them – or 19.4 per cent – made a positive total return in 2018. We narrowed it down further to look at those that were in their sector's top decile and found that just 26 were left.

Performance of fund vs sector and index in 2018

 

Source: FE Analytics

The giant fund with the biggest 2018 return was the £1.8bn Baillie Gifford American fund, which is managed by Gary Robinson, Helen Xiong, Tom Slater and Kirsty Gibson. In terms of the whole Investment Association universe, the fund’s 13.34 per cent gain was the sixth-highest overall despite a downward turn in the middle of the year.

Baillie Gifford American, which holds four FE Crowns, has a benchmark-agnostic approach and tends to have a bias towards companies that use disruptive technologies. This is shown through large holdings in stocks such as Amazon.com, Tesla and Netflix.

The FE Invest team, which has the fund on its Approved List, said: “Overall, the fund would be most suited to a portfolio with a long-term investment horizon as well as one that can tolerate high volatility.”


While Baillie Gifford American had a strong 2018, it has a healthy long-term record as well – FE data shows it is in the IA North America sector’s top decile over three, five and 10 years. Over the past decade, it has made a total return of around 375 per cent, compared with 290 per cent for the S&P 500, in sterling terms.

Five other IA North America members have made it onto the list of giant funds at the top of their sector: Morgan Stanley US Growth, T. Rowe Price US Large Cap Growth Equity, Morgan Stanley US Advantage, AB American Growth Portfolio and Legg Mason ClearBridge US Large Cap Growth.

However, the IA Global sector is the most commonly found peer group on the table with eight of its members being included for their top-decile returns.

 

Source: FE Analytics

Lindsell Train Global Equity is the best performer of the eight after making 11.07 per cent in 2018, against a 5.72 per cent loss by its average peer and a 3.04 per cent fall in the MSCI World index. Performance has been strong over the long term as well, with it making a top-decile 251.86 per cent gain since launch in March 2011 – the second best return in the sector.

The £5.4bn fund, which is headed up by FE Alpha Managers Michael Lindsell and Nick Train along with James Bullock, holds five FE Crowns for superior performance when it comes to stock picking, consistency and risk control in recent years.

Its portfolio is a concentrated collection of durable, cash-generative business franchises, typically in areas such as financial services, consumer goods and media. Top holdings include the likes of Unilever, Diageo, Heineken, Walt Disney and Nintendo.


While eight members of the IA Global sector made it onto the list, only one giant IA UK All Companies fund generated a positive 2018 return and was top-decile among its peers.

TB Evenlode Income made 0.39 per cent in 2018. Although this is just in positive territory, it is significantly ahead of the 9.47 per cent loss for the FTSE All Share index and the 11.19 per cent fall by its average peer.

The £2.5bn fund is run by FE Alpha Manager Hugh Yarrow with Ben Peters as deputy; it also holds five FE Crowns. Since launch in October 2009, it has made a 188.83 per cent total return, which is the sector’s ninth-highest over this period.

Square Mile Investment Consulting & Research, which gives Evenlode Income an ‘A’ rating, said: “Within the context of the UK equity income universe, we believe this fund may offer something different.

“The managers look to invest in companies that can deliver sustainable growth with limited need for capital reinvestment and can therefore return cash to shareholders by way of dividends. This does sound rather simplistic however there are a surprisingly low number of funds that actually follow this philosophy so closely as this strategy.”

Performance of fund vs sector and index in 2018

 

Source: FE Analytics

Of course, 2018 was such a challenging year that funds could make a loss and still be in their sector’s top decile. If we widen the criteria to allow those giant funds on the list, another 30 delivered a decent outcome for their investors, in relative terms, last year.

The largest of the funds that made a 2018 loss but are still in the top decile is LF Lindsell Train UK Equity, which is managed by Nick Train and has assets of £5.5bn. It has a similar approach to Lindsell Train Global Equity but with a focus on UK equities.

Other well-known names include Jupiter European, Trojan, Liontrust Special SituationsThreadneedle UK Equity Income and Schroder Income.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.