UK mid- and small-cap focused funds dominate the top of the list for portfolios that have made positive returns in the most months over the past decade, according to FE Analytics.
Over the last 10 years the mid-cap sector has been the place to be, with the FTSE 250 more than doubling the returns of the large-cap FTSE 100 index.
Performance of indices over 10yrs
Source: FE Analytics
The mid-cap index has also enjoyed more monthly periods of positive returns (75 out of 120) than the large-cap benchmark (69).
It stands to reason therefore that those funds with a mid- and small-cap bias have enjoyed more positive months than their large-cap peers.
In an upcoming article FE Trustnet will look at the correlation of fund outperformance to the FTSE 250 and ask whether UK funds are too reliant on mid-caps.
In this study, we looked at the funds with a 10-year track record and evaluated in how many months it would have made you a positive return, having previously examined the IA Global sector.
On average, funds in the IA UK Equity Income sector and IA UK All Companies sector respectively have achieves a positive return in 71 out of 120 months (59 per cent of the time) however there are some that have achieved significantly more and less.
Focusing on the larger IA UK All Companies sector first, several mid- and small-cap specialists including Liontrust Special Situations, Royal London UK Mid-Cap Growth and Barclays UK Lower Cap dominate the list.
However, the fund with the most positive months over the last decade is the five FE Crown-rated MFM Bowland run by Leon Shuall from Hargreave Hale.
The fund has made a positive return 70 per cent of the time, however it is not the best performer in the sector.
While it has made a top quartile return over the last 10 years, it has one of the largest maximum drawdowns – the most an investor could have lost if buying and selling at the worst possible times – suggesting that it has been more volatile than others.
The only fund not in the top two quartiles for overall performance among the 10 best performers over the past decade is the Allianz UK Opportunities fund run by Matthew Tillett.
While it has made a positive return in 79 months, the portfolio has returned 86.51 per cent, 10.1 percentage points fewer than the FTSE All Share.
Like MFM Bowland, it also has one of the largest maximum drawdowns in the sector of 43.27 per cent.
The fund with second-best track record is FE Alpha Manager Mark Slater’s £533m Slater Growth, which was the best performing fund in the sector. It has achieved 82 months in positive territory.
Liontrust Special Situations, run by FE Alpha Managers Anthony Cross and Julian Fosh is next with 80 positive months.
The fund takes a more small- and mid-cap focus, with 40 per cent in the large-cap FTSE 100 index. Over the period it has made top quartile returns while also achieving a top quartile maximum drawdown.
Royal London UK Mid-Cap Growth, Barclays UK Lower Cap and F&C UK Mid Cap all also have achieved a positive return in 80 of the 120 months.
Table of top and bottom 15 funds for monthly positive periods over 10yrs
Source: FE Analytics
At the other end of the spectrum, HSBC UK Focus has been the least consistent performer, making positive returns in 54 per cent of months over the last decade (65).
Aberdeen UK Equity, HSBC UK Freestyle and Halifax Special Situations all sit next on 55 per cent with 66 positive months.
Turning to the IA UK Equity Income sector, the fund with the highest number of monthly gains is Unicorn UK Income run by FE Alpha Manager Fraser Mackersie and Simon Moon.
The £682m fund has returned 248.19 per cent over the last decade with 81 positive months out of 120. The managers invest in predominantly mid- and small-caps and is relatively concentrated with 50 stocks in the portfolio.
MI Chelverton UK Equity Income run by David Horner and David Taylor is the second on the list and is another with a lower market cap slant.
F&C Responsible UK Income and JPM UK Higher Income are the only two of the top 15 to fail to make above average returns over the last decade, despite more months of gains than losses.
The pair have both made positive returns in 62 per cent or 74 out of the last 120 months, but have made third-quartile returns of 103.66 and 89.33 per cent respectively.
Table of top and bottom 15 funds for monthly positive periods over 10yrs
Source: FE Analytics
At the other end of the spectrum, M&G Dividend has the fewest number of monthly gains of any UK fund, with just 63 or 53 per cent.
It is not the worst performer, however, as it has returned 80.8 per cent over the past 10 years. It has a maximum drawdown of 31.78 per cent – a second quartile figure – which suggests it has been less volatile than the others.
Aberdeen UK Equity Income is next, with 65 positive months, while Fidelity Moneybuilder Dividend, F&C UK Equity Income and Castlefield B.E.S.T Sustainable Income have all achieved positive returns 55 per cent of the time.