JO Hambro Capital Management, Ruffer LLP and Unicorn Asset Management are some of the smaller fund groups that have a high share of their funds sitting on top-quartile returns for the past decade.
In a recent article, we examined the asset management groups that have ranges of 10 or more funds with track records spanning the past decade to discover which were the most consistent outperformers. That study found Baillie Gifford, Investec and Premier have the greatest proportion of their funds in the top quartile over 10 years.
We now turn our eye to fund management houses with between three and nine funds with a sufficient track record. We ran the total return of every fund over the 10 years to the end of 2017, ranked them by quartile (where appropriate to do so, meaning absolute return, unclassified and specialist funds are among those excluded) and determined what share of each group’s range was in the top quartile.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Coming in first place was JO Hambro Capital Management; the group has five funds with a long-enough history and every one of them is in their respective sector’s first quartile on a 10-year view.
The group highlights its relatively small size as being an advantage: “Our fund managers have complete investment freedom – there is no ‘house’ view on economies, markets, sectors or stocks. This leads to a diversity of views and approaches across our investment professionals and insulates us from the dangers of ‘groupthink’.
“This intellectual latitude and the absence of bureaucratic practices associated with many larger fund management houses has led to extremely low turnover amongst our investment professionals.”
The fund illustrated in the above chart is the JO Hambro fund that posted the highest return over the 10 years to the end of 2017. James Lowen and Clive Beagles’ £3.5bn JOHCM UK Equity Income fund is the third best performer in the IA UK Equity Income sector over the past decade after making 176.32 per cent; it’s also top quartile over one, three and five years.
JOHCM UK Equity Income – which is soft-closed – will only invest in stocks that yield more than the FTSE All Share index on a prospective basis and will sell holdings if they yield the same or less than the market. At the moment its largest holdings include Royal Dutch Shell, BP and HSBC, reflecting overweights to financials and oil & gas.
The other four top-performing funds managed by the group are JOHCM European Select Value, JOHCM Japan, JOHCM UK Growth and JOHCM Continental European.
Ruffer LLP comes in second place as all three of its funds with a 10-year track record are top-quartile over 10 years. The company’s funds have the aim of delivering positive returns, regardless of how financial markets perform; its two investment objectives are to avoid losing money in any rolling 12-month period and to grow investments at a higher rate than would be possible with a cash deposit.
Source: FE Analytics
While seemingly modest objectives, they have paid off over the long run. The group’s best performing member in this study is LF Ruffer Equity & General, which has made 119.93 per cent and is the third highest returning member of the IA Flexible Investment sector.
Headed up by FE Alpha Manager Alex Grispos, the £142.2m fund predominantly invests in equities with North America and the UK being its biggest geographical exposures. It also holds 27 per cent in cash.
According to Ruffer, the fund has a “conservatively balanced, opportunistic [and] valued-based approach”. It also stressed that the fund should be seen as a long-term holding and to this end Grispos has his pension invested in it.
LF Ruffer European and LF Ruffer Total Return are the other two funds from the group that are eligible for this research and are in their respective sector’s top quartile. The group does have some funds in the IA Specialist and IA Unclassified sector, where quartile rankings are not appropriate.
JO Hambro Capital Management and Ruffer LLP are the only two smaller fund groups with 100 per cent of their funds sitting on first-quartile 10-year returns. Two others – Morgan Stanley Investment Funds and Unicorn Asset Management – have 80 per cent of their range at the top of their peer groups.
With Morgan Stanley, its US Advantage, US Growth, Global Brands and Global Property made the grade. Over at Unicorn Asset Management, the top-performing members of its range are Unicorn UK Income, Unicorn Outstanding British Companies, Unicorn UK Growth and Unicorn Mastertrust.
Meanwhile, three-quarters of SVM Asset Management’s range (SVM UK Growth, SVM All Europe SRI and SVM UK Opportunities) have made their investors top-quartile total returns over the 10 years to the end of 2017.
Troy Asset Management, River & Mercantile Asset Management, Rathbone Unit Trust Management, Liontrust Fund Partners and GLG Partners are some of the other well-known fund management houses that have more than one-third of their eligible funds among the highest returners of their respective sectors.