The same can be said of funds, according to Hargreaves Lansdown’s Richard Troue, who says a couple of years of underperformance from a good fund manager can often signal a great buying opportunity for anyone with a 10-year plus time horizon. Troue (pictured) highlights five funds poised for long-term outperformance that investors can tuck away for years and not worry about.
M&G Recovery
One fund Troue highlights as representing a good buying opportunity for long-term investors is the £7.1bn M&G Recovery fund, managed by FE Alpha Manager Tom Dobell.
The fund has struggled of late, but Troue says this is exactly why investors should be thinking about buying it.
"The fund has suffered a bit from poor holdings in the resources sector," he said. "Some investors are starting to give up but this is more a time to think about adding a position. After a few years of underperformance, we still think he’s a very good fund manager. It’s definitely worth taking a look at."
While M&G Recovery has lagged both the IMA UK All Companies sector and FTSE All Share over one and three years, over the longer-term Dobell has clearly outperformed.
Over the last decade the fund has gained 179.4 per cent while the sector and index have made 129.24 per cent and 140.24 per cent, respectively.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund requires a minimum investment of £500 and has ongoing charges of 1.5 per cent.
Troy Trojan
Another fund that has had a tough time of late but that Troue thinks represents a good long-term bet is the £2.5bn Troy Trojan fund.
The mixed asset portfolio, run by star manager Sebastian Lyon (pictured), has been cautiously positioned throughout this year, something that Troue says has contributed to its underperformance.
"The manager has been cautious and negative on the market and the market has done quite well," he explained.
However, Troue says that while the full impact of a pullback in QE is unclear, the manager’s bearish stance could well pay off in the long-run.
"If QE leads to inflation, over the long-term it might provide a nice hedge," he said. "You can tuck it away and forget about it and hopefully he will have done a good job protecting and growing capital."
The fund has proved itself against its peers over the long-term, returning 123.9 per cent over the last decade. The IMA Flexible Investment sector made 94.83 per cent over this period. However, it has lagged the FTSE All Share over this time.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund is soft-closed to direct investment, but investors can still access it via platforms. It has ongoing charges of 1.09 per cent.
Artemis Strategic Assets
Another multi-asset portfolio Troue likes is William Littlewood’s Artemis Strategic Assets fund.
"The fund takes the pressure off asset allocation," he said. "The manager is one I like and I trust him to manage over the long-term."
The £1bn fund has outperformed the IMA Flexible Investment sector over the last one and three years, although it has lagged the FTSE APCIMS Stock Market Growth index over three years.
The fund has made 56.9 per cent since launch in May 2009, while the sector and index are up 53.24 per cent and 64.03 per cent, respectively.
Performance of fund vs sector since launch
Source: FE Analytics
The fund is slightly tilted toward equities, with 53.3 per cent of the portfolio invested in the asset class. Littlewood holds just shy of 5 per cent of the fund in cash.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.59 per cent.
Marlborough Multi-Cap Income
Due to the impact of compounding, equity income can be a strong long-term strategy, according to Troue.
For this exposure he likes the £469.3m Marlborough Multi Cap Income fund, run by FE Alpha Manager Giles Hargreave.
"The fund can be a bit riskier because it invests in mid and small caps as well as large caps. But it’s a nice one to tuck away and if you’re reinvesting your dividends, it will do especially well over the long run," he said.
As well as yielding 3.98 per cent, the fund has outperformed the IMA UK Equity Income sector over its short history.
Since launch in June 2011, the fund has gained 43.86 per cent while the sector has made 26.74 per cent.
Performance of fund vs sector since launch
Source: FE Analytics
Industrials and financials as the highest sector weightings in the portfolio, with companies such as Polar Capital Holdings and housebuilder Persimmon featuring in its top-10.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.52 per cent.
JM Finn Global Opportunities
Emerging markets have certainly been out of favour in recent months, having been hit hard by the summer correction.
However, Troue says the underperformance is a signal the sector is worth looking at again.
But rather than going for an all-out emerging markets fund, he suggests the £86.8m JM Finn Global Opportunities portfolio, run by FE Alpha Manager Anthony Eaton.
"It’s a good way to play emerging markets growth because it offers you more security over your investments," he said.
The fund, which is yielding 2.02 per cent, has had a tough time compared with its peers over the last five years.
However, since launch in January 2004 it has made 150.5 per cent, more than 50 percentage points more than the IMA Global sector, which gained 93.36 per cent.
Performance of fund vs sector since launch
Source: FE Analytics
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.83 per cent.
