Boutique asset managers with a focus on the quality-growth style – like Fundsmith, Seilern and Comgest – have seen most of their funds hold on to sector-topping returns in 2020, Trustnet research shows. 
In a previous article, we looked the larger asset management houses to find out which have the most of their funds in the top quartiles over 2020’s first four months, which saw the coronavirus sell-off, a market bounce and the global economy start to show the effects of mass lockdowns.
Baillie Gifford topped the list as two-thirds of its range was top-quartile over 2020’s opening four months; it was followed by Wellington Management Funds, Columbia Threadneedle Investments, Barings and T. Rowe Price.
Here, we turn our attention to groups that have fewer than 15 funds in sectors where quartile rankings are deemed appropriate, which means those in peer groups like IA Targeted Absolute Return, IA Specialist and IA Volatility Managed are excluded.
Out of the 160 investment groups that are covered in this research, 74 have just one or two eligible funds. Having this few funds makes it certain or more likely that all their offering is in a single quartile, so we’ll take a quick look at them separately.
Of these 74 groups, 12 have 100 per cent of their line-up in the top quartile of their peer group. These include well-known names such as Fundsmith (Fundsmith Equity, Fundsmith Sustainable Equity), Evenlode Investment Management (TB Evenlode Income, TB Evenlode Global Income), Sanford DeLand Asset Management (CFP SDL UK Buffettology, CFP SDL Free Spirit) and Blue Whale Capital (LF Blue Whale Growth).
Conversely, 16 of these groups have all of their one or two eligible funds in their sector’s bottom quartile over 2020 to the end of April. Among these are GVQ Investment Management (GVQ UK Focus, GVQ Opportunities), Wise Funds (TB Wise Multi-Asset Income, TB Wise Multi-Asset Growth) and Aberforth Unit Trust Managers (Aberforth UK Small Companies).
Source: FE Analytics
Of the 86 asset managers with between three and 14 funds eligible for a quartile ranking, 36 have more than one-quarter of their range in their respective sectors’ top quartiles – shown in the table above.
Only one has a perfect score: Seilern Investment Management, as Seilern World Growth, Seilern America and Seilern Europa are all among the best funds of their peer group over 2020 so far.
As a group, Seilern is resolutely a quality-growth investment house and the process used on every fund is designed to identify a small number of the highest quality businesses in the market.
The quality-growth style of investing has performed very strongly over the past decade (it is used by top-performers such as Fundsmith and Lindsell Train) and has continued to do well in the coronavirus crisis as investors prefer the relative safety these stocks offer when compared with value.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
In a recent interview with Trustnet, Seilern World Growth lead manager Michael Faherty explained how the firm uses a rigorous process to whittle down its investment universe from more than 58,000 stocks to a list of between just 50 and 70 companies.
Through this process, the firm is looking for companies that possess 10 specific characteristics to populate its Seilern Universe. In short, a company needs to have a scalable business, superior industry growth, consistent industry leadership, sustainable competitive advantage, strong organic growth, wide geographic and customer diversification, a solid financial position, transparent accounts, excellent management and corporate governance, and be asset-light and profitable to be owned by the group’s funds.
Comgest Asset Management comes in second place as 12 of its 14 eligible funds made top-quartile returns over the four months under consideration. These include the £3.4bn Comgest Growth Emerging Markets, £3bn Comgest Growth Europe and £1.9bn Comgest Growth Japan funds.
Like most of the fund groups that have held relatively well over the coronavirus pandemic (as well as performing strongly in the bull market that preceded it), Comgest follows the quality-growth style of investing.
Explaining its process, the group said: “We believe growth in earnings per share is the primary driver of stock prices over the long term. We invest in only a small number of companies that we believe have sustainable competitive advantages, high barriers to entry and pricing power which makes them capable of growing their medium-term earnings, irrespective of the economic cycle.”
In third place is Troy Asset Management, which has five of its funds – Trojan, Trojan Income, Trojan Global Equity, Trojan Global Income and Trojan Ethical – in their respective peer groups’ top quartiles.
Another advocate of quality investing, the firm is also known for its defensive approach and putting capital preservation at the very heart of its process.
As the group explained: “Since its foundation in 2000 Troy has specialised in a distinctive method of investing that prioritises the avoidance of permanent capital losses. This is achieved through cautious asset allocation and the careful selection of high-quality companies.”
Source: FE Analytics
When we flip things on their heads, we get the above list – which shows all groups with between three and 14 funds and more than 25 per cent of their line-up in the bottom quartile over 2020’s first four months.
Garraway Capital Management comes out worse as all six of the group’s eligible funds are in the fourth quartile, although all are less than £20m in size. They include the VT Garraway UK Equity Market and VT Garraway Multi Asset Balanced funds.
GLG Partners is in second place as eight of the nine funds we looked at are bottom quartile, including Man GLG Japan Core Alpha, Man GLG Undervalued Assets and Man GLG Income. However, the remaining fund – the £1.3bn Man GLG Continental European Growth fund – is in the top quartile.
Other well-known groups appearing on the above list include Unicorn Asset Management, Polar Capital, River & Mercantile, Odey Asset Management and Somerset Capital Management.